Latest Microsoft News

Can There Be 'Wow' in Vista Marketing?

2008-07-17T21:33:00.000+05:30

Yesterday's Microsoft marketing bravado is just too funny. So now, 17 months after general availability, Microsoft will promote Windows Vista? Get a life.

The big talk and promises came from Microsoft's Worldwide Partner Conference, in Houston, where Brad Brooks fessed up about Vista marketing mistakes and promised there would be response to Apple's "Get a Mac" ads. They say that confession is good for the corporate soul. I say that it's not good enough.

Microsoft should never have abandoned the original "Wow" Windows Vista marketing campaign. It brought new meaning to the term "marketing blitz." The campaign flashed by before anybody could blink and say, "Wow." Even if Microsoft executives loathed the ads, better to keep them than have nothing. I remain convinced that the Vista marketing campaign could have been very effective. The TV commercials were aspirational, potentially creating positive feelings about the then-mysterious Windows Vista.

Products don't sell themselves. There are good reasons why companies market their stuff. Products must be sold. The best sales pitch is life betterment. Why are people waiting a week in line to buy Apple's iPhone 3G? Because they believe the device will make better their puny little lives. Apple iPhone TV commercials run during most popular primetime programs. The marketing works.

There has been nobody out there saying how good is Windows Vista. But there are plenty of voices, including Apple's "Get a Mac" ads, shouting about how bad is the operating system. It's disgusting that Microsoft showed so little Vista marketing concern for so long. Any ad would be better than none.

Suddenly, there's bravado. Microsoft is making promises about real Vista marketing. Earth to Microsoft, it's going to be too little too late. Windows Vista is the high school outcast. It has got a bad reputation, and people won't easily forget. Marketing damage control is better than nothing, but it could have been avoided. Microsoft should never have given up on "Wow."

Whatever Microsoft does next can't be much worse than nothing. Still, the new marketing campaign, presumably for Windows Vista plus Windows Live, has got to have punch. The marketing must be creative, funny and aspirational—why your life will be better for buying a Windows Vista PC. Microsoft has to make people want Vista.

I grew up in Northern Maine about 16 kilometers from the Canadian border. The local CBC TV station, out of Saint John, New Brunswick, ran these crazy shampoo commercials. The theme: An American would try to smuggle the shampoo into the United States, only to be repeatedly caught by Canadian Customs. The shampoo was only sold in Canada, but was so good Americans would risk going to jail for smuggling out the hair contraband. The ads tapped into feelings about Canadian pride, American disdain and the product's value. You wanted to buy that shampoo.

To repeat: Microsoft marketing has to make people want to buy Windows Vista. The marketing will fail if it's about features or appeals to the intellect. Most purchasing decisions are emotional. Featuring people in ads is one of the most effective ways of generating good feelings about products. After all, people can connect to other human beings—there is common base—and people use the products. Apple's "Get a Mac" ads are effective because of how well they use people as metaphors for conveying typically complicated technological gobbledygook.

This afternoon, I drank some coffee to fire up the synapses, pondering what kind of commercials could be effective. I humbly offer up a couple, starting with response to "Get a Mac" anti-Vista propaganda. Microsoft shouldn't directly attack Apple. Better: Parody the "Get a Mac" ads, making a subtle but important point about Windows PCs. For this one, viral video would be better than commercial broadcast.

Here's what I'd do: The video opens with two guys standing against a white background, just like Apple's commercials. The viewer hears the familiar "Hello, I'm a Mac." "And I'm a PC." Then another guy appears, "And I'm a PC." Another and another and another appears, with popping sounds, each saying, "And I'm a PC." This goes on for about 10 seconds, with hundreds of PC people from different races and cultural attire popping up to overlapping choruses of "And I'm a PC." Then there is silence. The Mac guy looks at the thousands of PC people and mutters, "Wow." Across the screen flashes text: "You can be alone. Or you can have friends." The Windows Vista logo flashes. Video ends.

Everybody knows that there are more Windows PCs than Macs, right? The commercial would play on connotations of safety in numbers, community and fear of being alone. Human beings are social creatures, after all.

Here's another idea, and the last one. I'm not an advertising expert. These concepts are tough for me to think up: The scene opens on a park playground, with a woman facing us; she taps on a notebook resting in her lap. The camera zooms in as her friend walks up pushing a baby carriage. The woman immediately closes the lid, and her friend reacts with surprise. "Jane, what was that for? What are you hiding?" There is short silence, and the woman flips the lid to show the Vista desktop. "It's Windows Vista. I've heard so many bad things, I'm a little embarrassed about using it. But I really like Windows Vista. It's simply amazing." The friend shakes her head and smiles. She reaches into her tote bag, pulls out a laptop and flips the lid. It's Windows Vista. Both women laugh.

There are lots of ways Microsoft could wrap up the commercial; I'm more anxious to blog this post than make suggestions. I can't imagine Microsoft ever airing such a concept, though. But Microsoft needs something this aggressive—that hits hard at the Vista negativity and appeals to people that like the operating system. The commercial could easily feature two teens instead of mothers. Kids understand about being ostracized, as do many parents of middle or high school students.

How will Microsoft really market Windows Vista? We may soon find out.

Microsoft's Extinction-Level Event

2008-07-14T08:34:00.001+05:30

If you're a dinosaur, extinction is inevitable.

But dinosaurs aren't replaced by mammals overnight. Evolution is a long process, which is why Microsoft can get away with its convoluted approach to partnering on hosted Web services. And I don't believe Microsoft's partner pitch; snake oil salesmen and pyramid schemers have made it before.

Simply put: Microsoft hosted services will bring some partners to extinction, because to make the big money they'll have to commoditize their own market. Shall I repeat that?

To quickly recap: Today at the Worldwide Partner Conference in Houston, Microsoft announced pricing for its Online Services, which initially will be available in Deskless and Business Productivity suites. The Deskless version costs $3 per employee per month for light versions of Exchange or SharePoint. The full suite, at $15 per employee per month, offers up hosted Communications, Exchange, Office Live and SharePoint products. Microsoft partners that sell the suite get up to 18 percent back the first year and 6 percent back thereafter.

"Once a quarter we send them a check," said Eron Kelly, director of Microsoft Online Services, during a conference call today.

Eron used the example of a partner selling 3,000 seats of Microsoft Online Services, which would have "almost $100,000 in residual fees." By my reckoning, that's $540,000 to Microsoft the first year and $97,200 for the partner—or $24,300 for the first partner payment. That's a helluva lot of upfront incentive for a partner to sell Microsoft hosted services.

But Eron's additional-year partner payback didn't initially add up for me. "By the end of the third year, that would grow to $162,000 if they were able to add those 3,000 seats each year." By my math, the partner would get $32,400 per year or $64,800 at the end of the third year. Near the end of the conference call, I asked Eron to explain his math. He's assuming that the partner would sell an additional 3,000 seats, not keep them as I assumed he meant.

Let me be clear: I know Microsoft isn't selling some kind of pyramid scheme, but it sure feels like it. The only way to sustain the revenue stream is to sell more seats in subsequent years. Here's how the math works out: In year two, the partner would make $129,600 by selling 3,000 more seats. In the third year, that take would be the aforementioned $162,000. In the fourth year, again adding 3,000 seats, the incentive would be $194,400. Half that amount, $97,200, would be equivalent to the partner's take from the first year incentive.

Partners must continue selling more hosted services seats to sustain Microsoft's payback. From Microsoft's perspective, it has got to be a sensible model. Partners make more by selling more. It's Partnering 101. But the process also cannibalizes the partners' market, by commoditizing server software that they would otherwise sell or service.

Microsoft Is the Landlord
Eron put forth some lamebrain perspective about how much partners would make selling additional services, such as Active Directory and Exchange e-mail integration, to support Microsoft Online Services. D`oh, these are short-term, not long-term services. There is a point where the work is done, because the customer has moved out of the owned property into a rental unit.

Microsoft is the new landlord, when the moving is done. The partner then gets paid by property owner Microsoft rather than by the enterprise business owner. Microsoft pays less over time, unless the partner moves more of its customers to rental units. By providing direct services under contract to businesses that own their own property, so to speak, the partner can collect ongoing services, maintenance and help desk fees.

I haven't done the hard math on this yet, but let's try a hypothetical scenario. Partner Bill has 12,000 seats, same number which in my aforementioned example he would have converted to hosted services over four years. Hypothetically, Bill collects a mere 10 bucks per seat for providing comprehensive site maintenance, including testing, deployment and management services. That's $120,000 a month in service fees, or $1.4 million a year. What if Bill made just $3 per seat per month, same as Microsoft charges for its Deskless suite? That's $36,000 a month, or $432,000 in one year. Bill doesn't need to aggressively sell 3,000 more seats each year, but simply organically grow his business and properly service existing customers to maintain them.

The example oversimplifies, because the partner assumes additional costs that would reduce margin of profits. For Online Services, Microsoft would assume more of the costs of doing business, but by no means all. Example: Sales and marketing. In the ownership example, the partner maintains customers and steadier revenue stream. For Microsoft rentals, the partner turns over customers to Microsoft, reducing the long-term pool of customers, commoditizing server software services and requiring further commoditization to continue generating revenue.

For partners looking to expand their businesses, Microsoft has given them incentive to get new customers and for a handsome first-year cut of the proceeds. But the gains, whether from hosting sales or partner-provided migration services, are short term. First benefit goes to Microsoft, which fosters commoditization to its benefit; better that Microsoft gets paid for hosted services than Google, Salesforce.com or other Web 2.0 platform companies.

Microsoft doesn't want to be the dinosaur, which is why the model now embraces hosted services. But Microsoft's partner approach to hosted services is sure to ensure that many partners will remain dinosaur's bound for extinction. Perhaps this year's Worldwide Partner Conference should be called Microsoft's "Extinction-Level Event."

Microsoft's Suite Response to Google, Partners

2008-07-13T08:24:00.000+05:30

As the saying goes, Microsoft will rob Peter to pay Paul.

Today, at its Worldwide Partner Conference, Microsoft announced pricing and partner compensation for its suite of Online Services. The venue is somewhat surprising, because Microsoft-hosted services directly compete with similar offerings from its partners. Microsoft's solution: Cut in partners on the action.

In a Google world of free services supported by advertising, Microsoft's competitive response options are limited. Microsoft doesn't have a successful enough search and advertising platform to compete with Google in free services such as Docs; there is too much risk of hurting sales of desktop and server products such as Exchange Server and Office; and Microsoft is dependent on a large network of partners to sell its wares. There are few giveaway options.

Microsoft's compromise is to offer services cheap, while compensating partners. It's a risky move, because channel conflict is inevitable. Microsoft can coat this bitter pill in sugar, but the taste lingers: The company is directly competing with its partners.

The company's first Online Service is called the Deskless Worker suite. Ala carte offerings for "light" online versions of Exchange or SharePoint cost $3 per employee per month. The whole Business Productivity Online Suite—hosted Communications, Exchange, Live Meeting and SharePoint—is $15 per employee per month. The math looks good for Microsoft and its customers. A company with 50 employees would pay $750 a month or $27,000 over three years, which is a typical time period for Microsoft volume-licensing contract with Software Assurance.

My initial response to the pricing, without doing a hard volume-licensing comparison, is positive. But Microsoft still charges quite a bit more than does Google for Apps, which are $50 per user per year. Microsoft's suite is $180 per user per year, assuming there are no hidden discounts or other devil-in-the-details considerations.

Microsoft gets recurring revenue from real subscriptions, not just volume-licensing commitments. Customers get hosted services from Microsoft that are in some ways better than packaged software. Microsoft takes on the administrative and technical burdens, which conceptually would reduce staffing and other IT Management costs. You can buy a home, or you can rent. If you rent, the landlord assumes responsibility for maintenance, upkeep and taxes. Microsoft is going into the IT landlord business.

But Microsoft has a problem: Its partners, whom Microsoft relies on to sell and service its products. The company has no large, dedicated sales force. Microsoft can't afford to piss off its partners. Microsoft Online Services compete with partners, whether they're selling or servicing on-premise software or selling their own hosted services using Microsoft partners.

Microsoft is trying to alleviate partner conflict by cutting them in on the action. Partners selling Productivity or Deskless suites will get 12 percent of the first-year contract, plus 6 percent of subscription fees. So, first-year bang is 18 percent. The aforementioned 50-seat example that could work out to $1,620 for the first year. I say could, because the devil is in the details with respect for what Microsoft accounts for when. Regardless, that's recurring revenue for the partner. In this scenario, $540 per year ($45 a month) from the subscription's second year.

Is that compensation model enough to alleviate channel conflict? Ideally, customers would still require something on the desktop, meaning Office and Windows. So there is real software that partners could sell and service. But the big money is on the server, and Microsoft would take away from some partners recurring service and maintenance fees. The hosted service kickback fees wouldn't make up for them, not for truly successful partners. Channel conflict is inevitable.

Should Microsoft be blamed for competing with its partners? Yes and no. The "yes" is Microsoft's over-dependence on the partner model. This isn't the first time Microsoft had to kick back money to partners, simply to avoid competing—or just the appearance of competing—with them. Best example: volume licensing, which technically should be a direct relationship with customers, but Microsoft cuts in partners. It's hush money. Don't complain. Be happy.

The "no" acknowledges a changing marketplace. Competition from Google and other Web 2.0 platform companies is real. There has to come a point where, say, Google's online suite, including Calendar, Docs and Gmail, is good enough for many businesses to stop buying Office. Increasing mobility—the need for informational access anytime, anywhere and on anything—creates a clear future for hosted software, whether done by the enterprise, Microsoft or one of its partners—or coming from competing, ad-supported or lower-cost products. Change is inevitable, too.

These changes affect the partner model by commoditizing some of the products and services they offer today. From that perspective, Microsoft is being generous to its partners. Microsoft is adapting its business to a changing computational marketplace, and it's cutting in partners on a piece of the action. It's adapt or die. If you're a dinosaur, extinction is inevitable.

Microsoft Makes November 'Essential'

2008-07-12T09:30:00.000+05:30

What is it with Microsoft and the second and third weeks of November?

Today, the company announced that Small Business Server 2008 and Essential Business Server 2008 would launch on Nov. 12. That's a popular week for Microsoft products. Some November blasts from the past:

Zune 2, Nov. 12, 2007
Office 2007 and Windows Vista, Nov. 30, 2006
Zune, Nov. 13, 2006
Xbox 360, Nov. 22, 2005
Halo 2, Nov. 9, 2004
Tablet PC 2004, Nov. 17, 2003
Xbox Live, Nov. 15, 2002
Xbox, Nov. 15, 2001

Is it like tradition for Microsoft to have big November product launches? The consumer products make sense for the holidays and then there was Comdex for business stuff. But the trade show is long gone. So, the reason to launch new server software is November for small and medium businesses that probably won't be looking to deploy over the holidays. "Merry Christmas, honey. It's Small Business Server 2008!"

Microsoft announced product pricing in June, so the products are moving ahead, but ever so slowly. Right now, release to manufacturing is tracking late August to early September. SQL Server 2008's late delivery is one major reason for the slow advance. And Microsoft has set dates whether or not SQL Server 2008 will be ready.

"We are going to be shipping SQL 2005 and SQL 2008 on our media in the box," Steven VanRoekel, Microsoft's senior director of the Windows Server Solutions group, told me last week. Microsoft is providing both versions for customers that might want the 2005 edition and coverage for still uncertain SQL Server 2008 availability.

Meanwhile, Microsoft isn't thumb twiddling until November. The company is readying the channel for SBS and EBS, such as delivering new SDKs and Solutions Pathway, a tool for calculating migration discounts from other Microsoft software (25 to 35 percent). Microsoft also will offer up to $200 rebates to partners whose customers acquire Software Assurance on new SBS 2003 R2 installations.

Microsoft will disclose more about the SBS and EBS partner programs and incentives, starting tomorrow, July 8, at the Worldwide Partner Conference.

"We're going to have a huge presence at the partner conference," VanRoekel said. "We'll have a larger booth than Windows and Windows Live. You're going to see us there loud and proud."

While "loud" applies to both products, EBS is a new category and one targeting a segment that has long been neglected, at least by Microsoft. EBS will be louder.

"One of the problems that we had in the midmarket is they've [partners] never had something they could really offer," VanRoekel acknowledged. EBS is Microsoft's server software entry into this segment. "There's a great consolidation story," he said. "The typical midmarket org uses seven to nine servers compared to EBS' three to four servers."

Microsoft wants to bring cultural change to midmarket IT managers. Steven said "the lifestyle midmarket IT lives" is "reactionary." EBS' goal: to make proactive management the lifestyle.

Yahoo, What Icahn Do to You

2008-07-11T09:30:00.001+05:30

Microsoft has made clear its intentions: to work with billionaire Carl Icahn for the end of Yahoo. So, this is Plan B: Snatch Yahoo search in a boardroom coup.

In an official statement issued today, Microsoft revealed that "in the past week we have had the opportunity to discuss with Carl Icahn the prospects for a possible agreement between Microsoft and Yahoo." Presumably that agreement would lead to Microsoft acquiring Yahoo's core search capabilities, which, as I've said, would lobotomize the media company.

The billionaire board buster bolsters his own position in a separate letter:

"During the past week I have spoken frequently with Steve Ballmer, CEO of Microsoft. Several of our conversations have lasted as long as an hour. Also, a few of our discussions have taken place while other top executives, such as Kevin Johnson, participated. Our talks centered on the industry in general but, more importantly, on how Yahoo and Microsoft can do a transaction together."

The statements clearly expose Microsoft's back-room corporate maneuverings. CEO Steve Ballmer and Co. aren't so squeaky clean after all. Microsoft's decision not to engage Yahoo in a proxy fight seemed sensible at the time—Microsoft withdrew its bid and decided to fight no longer. From Steve's May 3 Yahoo bid withdrawal letter:

"After giving this week's conversations further thought, it is clear to me that it is not sensible for Microsoft to take our offer directly to your shareholders. This approach would necessarily involve a protracted proxy contest and eventually an exchange offer. Our discussions with you have led us to conclude that, in the interim, you would take steps that would make Yahoo undesirable as an acquisition for Microsoft."

But that's not exactly true. Carl Icahn already was publicly hanging around, ready to take some action. Microsoft executives had to know this, and they may even have been contacted by the billionaire board buster. Microsoft didn't need to engage in a nasty proxy fight, because Carl was ready to do it again, as he had done with other companies.

Now the two sides are talking and not just to each other. Today's Microsoft letter was clearly for the eyes of Yahoo shareholders, whose votes Carl Icahn needs for orchestrating a proxy-fight-driven boardroom coup. From Microsoft's letter released today:

"Despite working since Jan. 31 of this year, as well as in the early part of last year, we have never been able to reach an agreement in a timely way on acceptable terms with the current management and Board of Directors at Yahoo. We have concluded that we cannot reach an agreement with them. We confirm, however, that after the shareholder election Microsoft would be interested in discussing with a new board a major transaction with Yahoo, such as either a transaction to purchase the 'Search' function with large financial guarantees or, in the alternative, purchasing the whole company."

If Yahoo shareholders want a deal with Microsoft, it has got to be with a new board. That's going to be a long-term losing deal for Yahoo shareholders, methinks. Their best return would come from a full Microsoft acquisition, something that would be bad for Microsoft. Obtaining Yahoo search would be good for Microsoft but be bad for Yahoo in the long term. Search is the core around which everything else revolves. Take away search and Yahoo spins apart, painfully, over several years.

I find this just laughable, from Microsoft's letter:

"As Mr. Icahn notes in his statement today, it would be premature to discuss at this time important details such as the price or other terms of a possible transaction. We respect the right of Yahoo's shareholders to determine the destiny of their company, and we do not intend to engage in ongoing commentary on these issues in advance of Yahoo's shareholder meeting."

"Respect the right" to "determine the destiny?" Oh, please! Microsoft has been trying to seize hold of Yahoo's destiny since making the unsolicited offer. And today's letter is all about influencing the destiny "in advance of Yahoo's shareholder meeting."

Yahoo's Response to Carl Icahn

2008-07-10T13:15:00.000+05:30

In a shareholder letter, Yahoo affirmed willingness to engage Microsoft in discussions. Text follows.

Yahoo's Board of Directors continues to stand ready to enter into negotiations with Microsoft Corporation for an acquisition of Yahoo. Indeed, as recently as June, Yahoo's independent directors and management approached Steve Ballmer about just such a transaction, only to be told that Microsoft was no longer interested even in the price range which they had previously proposed. Now Mr. Ballmer and Mr. Icahn have teamed up in an apparent effort to force Yahoo into selling to Microsoft its Search business at a price to be determined in a future "negotiation" between Mr. Icahn's directors and Microsoft's management. We feel very strongly that this would not lead to an outcome that would be in the best interests of Yahoo's stockholders. If Microsoft and Mr. Ballmer really want to purchase Yahoo, we again invite them to make a proposal immediately. And if Mr. Icahn has an actual plan for Yahoo beyond hoping that Microsoft might actually consummate a deal which they have repeatedly walked away from, we would be very interested in hearing it.

Microsoft's Letter Supporting Carl Icahn

2008-07-09T10:45:00.001+05:30

Today, Microsoft issued a Yahoo shareholder influencing letter supporting billionaire board buster Carl Icahn's hostile proxy fight. Text follows.

In the past week we have had the opportunity to discuss with Carl Icahn the prospects for a possible agreement between Microsoft and Yahoo.

Despite working since Jan. 31 of this year, as well as in the early part of last year, we have never been able to reach an agreement in a timely way on acceptable terms with the current management and Board of Directors at Yahoo. We have concluded that we cannot reach an agreement with them. We confirm, however, that after the shareholder election Microsoft would be interested in discussing with a new board a major transaction with Yahoo, such as either a transaction to purchase the "Search" function with large financial guarantees or, in the alternative, purchasing the whole company.

As Mr. Icahn notes in his statement today, it would be premature to discuss at this time important details such as the price or other terms of a possible transaction. We respect the right of Yahoo's shareholders to determine the destiny of their company, and we do not intend to engage in ongoing commentary on these issues in advance of Yahoo's shareholder meeting.

As we explained on June 12 when Yahoo announced an agreement with Google, we believe that our proposed search acquisition and partnership would have delivered superior value to Yahoo's shareholders and the marketplace as a whole. We have not changed our position, even as we continue to move forward with our own online search and advertising offerings. We therefore welcome interest by Mr. Icahn in pursuing this and other discussions.

While of course there can be no assurance of a future transaction, we will be prepared to enter into discussions immediately after Yahoo's shareholder meeting if a new board is elected.

Carl Icahn's Letter

2008-07-08T21:31:00.000+05:30

Today, billionaire board buster Carl Icahn issued a letter to Yahoo shareholders asking them to oust the board with the promise of a possible new deal with Microsoft. Text follows.

Dear Yahoo Shareholders:

During the past week I have spoken frequently with Steve Ballmer, CEO of Microsoft. Several of our conversations have lasted as long as an hour. Also, a few of our discussions have taken place while other top executives, such as Kevin Johnson, participated. Our talks centered on the industry in general but, more importantly, on how Yahoo and Microsoft can do a transaction together. Steve made it abundantly clear that, due to his experiences with Yahoo during the past several months, he cannot negotiate any transaction with the current board. His logic is simple. If and when a transaction was consummated, Microsoft would be guaranteeing a great deal of capital at closing. However, a transaction could take at least nine months and perhaps longer to obtain regulatory clearance in the U.S., Europe and elsewhere. During that period, if the current board and management team of Yahoo mismanage the company (and their recent track record is far from reassuring), Microsoft would be putting its money at risk and a great deal could be lost.

For example, in a transaction to purchase the whole company, a very large amount of capital would be due at closing. Even in an 'alternate' transaction, where just the "Search" assets were purchased, large guarantees would have to be made and, again, large sums could be lost if the company was mismanaged. Microsoft perceives this risk may be quite high with the current board and management in place. However, Steve made it clear to me that if a new board were elected, he would be interested in discussing a major transaction with Yahoo, such as either a transaction to purchase the "Search" function with large financial guarantees or, in the alternative, purchasing the whole company. He stated that Microsoft would be willing to enter into discussion immediately if the new board that has been nominated were elected. While there can be no assurance of a future transaction, as many of you know, I have negotiated successfully a large number of transactions over the past years. If and when elected, I strongly believe that in very short order the new board would, subject to its fiduciary duties, be presenting to shareholders either a purchase offer for the whole company or a very attractive offer to purchase "Search" with large guarantees. I hope to continue to be speaking to Steve over the next few weeks; however, since I do not as yet represent the Yahoo board, both Steve and I do not wish to get into details over price, or even which of these transactions makes the most sense.

Much has been said about how badly the Yahoo board has 'botched up' negotiations with Microsoft over the past months. There is no need to keep pointing out the mistakes I believe Yahoo made by not immediately taking a $33 offer made by Microsoft. But one thing is clear—Jerry Yang and the current board of Yahoo will not be able to 'botch up' a negotiation with Microsoft again, simply because they will not have the opportunity.

Our company is now moving toward a precipice. It is currently losing market share in its "Search" function; our current Board has failed to bring in a talented and experienced CEO to replace Jerry Yang and return Jerry to his role as Chief Yahoo, and currently it is witnessing a meaningful exodus of talent. It is no secret that Google (which hired a great operator as CEO) continues to dramatically outperform Yahoo. According to publicly available information, Google's income from operations grew 59 percent per year over the last two years while Yahoo's shrank 21 percent per year. However, none of the above has caused the Yahoo board to hesitate in paying themselves $10,000 per week. IT IS TIME FOR A CHANGE.

If elected, I have little doubt that the new board, subject to its fiduciary duties, will do what the current board will not do, i.e.,

Immediately start negotiation with Microsoft to sell the whole company or, in the alternative, sell "Search" with large guarantees.
Move expeditiously to replace Jerry Yang with a new CEO with operating experience.

Microsoft Partners Get Their Due, But Do You?

2008-07-07T20:59:00.001+05:30

Microsoft's annual Worldwide Partner Conference kicks off this week and it's going to be, big, Big, BIG.

During the event, Microsoft typically shows its partners love, and this year will only differ in the amount of love. Microsoft could and perhaps should call 2008 the "Year of the Partner." At no other time in its history has Microsoft offered partners more reasons to get exited or more reasons to worry (more on the worrisome stuff in a few paragraphs).

Microsoft has more products in the market requiring a partner's touch than any other year in the company's history. The best for partners: How Microsoft is packaging disparate products as enterprise solutions in categories like business intelligence or unified communications that require hefty testing, deployment and ongoing maintenance services. Better still, many Microsoft products are more complicated than ever, particularly when interacting with the company's other software.

Take Office 2007 and its new user interface, which necessitates extra training or help desk support; or the new server-function SKUs, which nearly require a mathematics degree to understand the pricing structure and benefits. Then there's Windows Vista, where hefty system requirements and resistance to custom applications mean lots of testing and integration work for somebody. Windows Vista is sure to keep many Microsoft partners fat and sassy even in lean economic times.

SharePoint Server 2007 is Microsoft's grab bag solution for collaboration, content management and blogging. Those team sites multiply faster than rabbits, and they're even tougher to manage. Microsoft marketing is pushing SharePoint harder than ever, plus there's a lot of cross-product integration with the server software.

Best yet: It's raining server software. Hyper-V, SQL Server 2008 and Windows Server 2008 are the starters. Plus, there's a new line of "Essential" business server software. Somebody is going to have to integrate this stuff. Can you say "Microsoft partners?"

But, using a highly overused Microsoft term, the "goodness" doesn't stop there. Microsoft is going into the hosted server software business, where it will compete with some partners. But not to worry, partners. The choices—partner hosted, self hosted or Microsoft hosted—will be confusing enough for many enterprises, so there will be plenty of consulting and integration services for somebody.

While my tone is a wee bit facetious, the partner opportunities are real and Microsoft has been quietly assembling supporting marketing and sales programs for them. Some of that valuable disclosure comes in the form of interoperability information that's sure to generate business for savvy partners looking to better piece together Microsoft products or join them with third-party products.

Who Really Pays?
My question for Microsoft: What do "real" customers pay extra for the privilege of all that partner assistance? I chuckle at nearly every Microsoft press release that touts enterprise benefits from the latest products or solutions that are simpler to use. Really? Simpler for whom? What I see is increasing complexity, everywhere. There are more Microsoft widgets to assemble together, more widgets requiring other ones to work and more complicated licensing SKUs for the widgets.

Microsoft doesn't have a big, dedicated sales force. The company relies heavily on partners to sell, as well as deploy and service its software. Microsoft's business model is intricately entwined with middle-men—partners—who make lots of money from complexity. Sure, other high-tech companies—like HP, IBM, Oracle or Sun—thrive on services. But, I believe, Microsoft's dependence on its third-party sales channel is a disincentive trait, and this leads to its enterprise software being more complex than needed. It's a symbiotic Microsoft-partner relationship where complexity is the common base.

So, I come to the important question: Who is Microsoft's real first customer? I say, it's the partners long before the enterprises actually paying for and using the software. Partners get their due—and there's plenty coming in 2008 and 2009—but do enterprises? I wonder how much better Microsoft software could be if it were engineered for enterprises as the first customer.

I suppose that some Microsoft product managers will contend that the software user, whether consumer or business, is the first customer. My response: Then why is there so much more benefit to the people selling or integrating the software? And why is there still so much complexity—and by my observance, more of it?

No question: It's a great time to be a Microsoft partner. Exception: This week's punishing heat. Why would any company hold a conference in Houston in July? The daily high temperature is expected to be about 90 degrees Fahrenheit and balmy, with humidity around 75 percent every day.

Microhoo: Breaking Up Is Hard to Do

2008-07-06T12:03:00.000+05:30

Rumors that Microsoft wants to break up Yahoo make sense to me. Steveo won't let go.

Today, the Wall Street Journal reported that Microsoft has sought out at least News Corp. and Time Warner as partners for picking away pieces of Yahoo—break it up. Microsoft CEO Steve Ballmer apparently still wants Yahoo's search business. If Yahoo won't willingly give it up, Microsoft will just take it.

Such a tactic isn't the least bit far-fetched. Yahoo's board is choking on the company's free-falling stock price, and billionaire Carl Icahn is waging a proxy fight to oust at least some board members. Meanwhile, Yahoo talent is leaping into the icy waters of job uncertainty rather than stay on the listing ship.

Yeah, Yahoo could be picked apart, with Microsoft getting the choice meat—search. I'm mixing metaphors, but there are so many sophomoric, metaphoric angles to this plot, I simply can't contain my enthusiasm. The whole "breaking up" concept is loaded with fun, sophomoric interpretations:

The jilted lover syndrome, where Microsoft courted Yahoo, which rebuffed its advances. Now, it's time for some sweet revenge; if I can't have you nobody can. I'll destroy you. I'm gonna break you up, baby.
"Hey hey, you you, I want to be your girlfriend." Yahoo fell into Google's loving arms. That's a relationship Microsoft can't stand not to break up.
What's good enough for you isn't good enough for me. Microsoft fought the Justice Department over 2000 sanctions that demanded the company breakup. Microsoft wouldn't split into separate companies but it has no qualms about breaking up Yahoo. Oh, the irony is thick.

The Journal positioned the talks with News Corp. and Time Warner as "preliminary and unlikely to result in a deal with Yahoo." Maybe, but the talks themselves are the point. Microsoft hasn't given up on getting something from Yahoo. The goal is no longer is the whole Yahoo but the piece that matters most to Microsoft—search.

I want to editorialize that Journal statement: "Unlikely to result in a deal with Yahoo" now. If Carl seizes control of Yahoo's board, there may be a sudden willingness for any deal and more interest from third parties to join in the pickings.

What I want to know: Why isn't Microsoft talking to Amazon.com? I stand by my long-ago stated opinion that an Amazon-Yahoo match-up looks really good. It could be a whole lot better if Amazon didn't have to assume all that search mucky muck; just outsource elsewhere.

But Amazoo could create other problems Microsoft wouldn't want to deal with later. Microsoft is already fixing to compete with Amazon's hosted data center services, which Yahoo could greatly extend. Amazoo could also tie many existing Yahoo services, such as Messenger, Shopping or even Flickr, to its retail engine.

Whomever the partners, if any, Microsoft isn't done trying to wrestle search from Yahoo. If that means a Yahoo corpse to get search, certainly. The break up plan adds more meaning to the saying, "Over my dead body."

Microsoft 'Equipts' Consumers

2008-07-05T11:00:00.001+05:30

Why would anyone pay $150 for Office 2007 Home and Student when they could get it and more for less than half the price?

That's the question Microsoft is hoping some consumers will ask about Equipt, the new subscription offering formerly code-named Albany. The question Microsoft might not want these same people to ask: Why spend 70 bucks when Google Docs is free?

This morning, Microsoft announced that the subscription product would be available through 700 Circuit City stores on July 15 for a 12-month subscription fee of $69.95. Equipt comes with the aforementioned Office version, Windows Live OneCare, Mail, Messenger and Photo Gallery. The subscription service also connects to Office Live Workspace for document sharing and collaboration. Equipt can be activated on up to three PCs, which is consistent with current Office Home and Student and OneCare licensing.

I expect plenty of commentators to view the announcement as a Microsoft versus Google thing. There's a little of that maybe, but I see Equipt more as Microsoft advancing further into the consumer subscription market and more closely aligning desktop and Web services. Revealing: Microsoft is leveraging a very different distribution channel than Google (more on that in a few paragraphs).

The question Bryson Gordon, Office group product manager asks: "How can we take rich client experiences we have today and how can we extend them into the cloud?"

That's exactly the thinking to expect from a Microsoft executive—how to maintain and extend the relevancy of desktop software to Web services. More importantly: How to best provide consumers with the newest software, while collecting ongoing subscription fees from them. "This is a subscription service, and one of the things we're committed to is making things better over time," Bryson said. "With Equipt everything is up to date." That includes the newest Office version.

Microsoft also sees Equipt as an anti-piracy effort. "The majority of the sales of Equipt are going to be coming from people that have an old copy of Office or received a copy from Bob up the street," Bryson said.

Equipt risks more to Microsoft than it offers a competitive advantage against Google's Web-based productivity suite. The subscription software/service could pull sales from Ã la carte OneCare and full-version Office Home and Student, which accounts for the majority of Office retail sales, according to the NPD Group.

"Yeah, there probably is going to be some cannibalization," Bryson conceded. But Microsoft research shows cannibalization will be low, he emphasized. Maybe, but I wonder about Office Standard. It's not like Microsoft is carding people to see where they'll be using the software. For many small businesses, particularly those already using Hotmail, Equipt may be all the Office equipment they need.

That's good segue for Microsoft's novel, early distribution channel for Equipt. "To reach the right kind of customer, we need a certain kind of sales motion," Bryson said. "With Equipt it's not just a process of put the product on the shelf, or put the product on the Web. Retail is the right place for us to start."

But not just every retail store. At launch, Equipt will only be "available in 700 stores across Circuit City." Bryson said. Microsoft has chosen a single distribution channel. Bryson said Microsoft picked Circuit City because the retailer was ready to engage customers in a "kind of a high-touch scenario. Equipt is better sold than bought."

Really? What's so high touch about Office? Everything. Most products are sold, not bought. Marketing matters—it's everything. Equipt is different and potentially confusing to consumers because it changes the model: no perpetual license, 12-month recurring fees and blended desktop and Web-based products. Equipt should be sold, as should many, many other Microsoft products that get shelf space and little more.

"We were looking to limit the distribution of this...to ensure the sales process was in place," Bryson said.

The choice of a single retailer is smart. Microsoft partners better than any other company on the planet. But to a fault. Microsoft deals too evenly with too many partners. Some partners do better than others; they should be given preferential treatment. I commend Microsoft for singling out Circuit City.

Bryson made it absolutely clear that Equipt will be available through other channels, and perhaps, even shortly from other retailers. Circuit City distribution puts other retail partners on notice: The rules are changing. Microsoft needs to do a whole lot more of picking favorites even if it pisses off some partners. A big Windows Vista plus Windows Live marketing blitz is soon coming. If I were Microsoft, only the best and most cooperative retailers would get the in-store displays, co-marketing dollars and Sunday circular ad support. It's long past the time when Microsoft played favorites.

Something else before closing: The name works. Equipt evokes good connotations of having the right equipment. Microsoft's nomenclature continues to slowly improve. That said, the packaging and subbranding, which I didn't see until today, really don't work. Rather than giving the new product its own, clear-brand identity, Microsoft put box shots of Office Home and Student and Windows Live OneCare on the Equipt box. Mixing brands like this might seem like a good idea by leveraging existing products. I don't agree. Like other, newer Microsoft products with better nomenclature—Expression Studio, Zune or Surface, among others—Equipt should have a distinct brand and logo. Hopefully, the in-store marketing materials will be better.

Microsoft Joins the Powerset

2008-07-04T10:40:00.000+05:30

The rumors were true, but not punditry about Powerset being Microsoft's search Plan B.

There has been talk about a Plan B ever since Microsoft withdrew its unsolicited offer for Yahoo about two months ago. Powerset is a good buy for Microsoft, but by no means Plan B for catching Google. That said, it's a helluva acquisition with long-term promise because of the Powerset team.

Microsoft officially announced acquisition of Powerset today. I kind of laughed reading the blog post, thinking back to an e-mail I got from Powerset last week about its new search product for Wikipedia and why it would be great for iPhone. Right, like I'll be getting any more iPhone-loving e-mail from Powerset now that Microsoft has come a calling.

Powerset is an important acquisition for Microsoft because it represents the Holy Grail of search long touted by CEO Steve Ballmer and Live Search executives: Natural language search. For years, Microsoft execs have taken the position that search is still in its infancy, even while Google gobbled up search share—now over 60 percent, according to ComScore. The theory: Keywords suck. People want to ask questions.

There's something to that asking questions stuff being a more natural way of looking for information. Keyword search is more than a means to an end, it's how Google makes money—surely Microsoft would like to tweak the business model as much as improve searches. (I'm being a wee bit facetious, as Powerset displays Google search keywords with its results; surely that will be one of the first changes Microsoft makes. Can you say Live Search keywords?)

Powerset is a hot startup, focusing on natural language search and with the new Wikipedia search feature little more than a month in market. As a Powertest test, I typed: "What are the five continents?" It's kind of a trick questions. Where I grew up, teachers taught about seven continents, but schools in some other countries use a smaller number. I got a surprising answer and learned something I should have known (shame on me): That the Olympic rings stand for the five inhabited continents. Way to go Powerset and Wikipedia.

Powerset puts the Wikipedia information in its own page with the aforementioned contextual ad keywords. There's definitely a business model here.

In announcing the acquisition, Satya Nadella, Microsoft's senior veep for Search, Portal, and Advertising, blogged:

"Problems exist because search engines today primarily match words in a search to words on a Web page. We can solve these problems by working to understand the intent behind each search and the concepts and meaning embedded in a Web page. Doing so, we can innovate in the quality of the search results, in the flexibility with which searchers can phrase their queries, and in the search user experience. We will use knowledge extracted from Web pages to improve the result descriptions and provide new tools to help customers search better."

Satya may be right, but this is an old song. Microsoft has sung so often about natural search, without reaching crescendo. Google may be unbeatable by the time there is a competitive solution from Microsoft. I look at Powerset as Microsoft's last chance to get natural search right, if it's not already too late. Windows long ago showed that better isn't necessary to be market leader, just good enough. Are keywords good enough? Maybe, if most everyone uses Google from their PCs (But Google isn't everywhere, as I will explain in the last paragraph of this post).

"Powerset will join our core Search Relevance team, remaining intact in San Francisco," Satya wrote. "More importantly, Powerset brings to Live Search a set of talented engineers and computational linguists in downtown San Francisco. This is a great team with a wide range of experience from other search engines and research organizations like PARC (formerly Xerox PARC)."

Remember Xerox PARC and the engineers who really developed the graphical user interface and mouse? PARC also is credited with WYSIWYG editing and the laser printer, among other inventions. So there is a certain esteem attached to any company remotely affiliated with PARC.

Microsoft picks up an impressive team of technologists with Powerset—perhaps the acquisition's most valuable asset:

Barney Pell, co-founder and CTO, worked for NASA and has a doctorate from Cambridge
Lorenzo Thione, co-founder and director of natural language technologies, is an expert in computational linguistics
Scott Prevost, general manger, has expertise in voice and facial natural user interfaces
Ron Kaplan, chief science officer, was chief scientist for PARC spin-off Microlytics and is another expert with natural language technologies
Chad Walters, search architect, is Yahoo's former Websearch architect
Tim Converse, director of ranking and metrics, is another former Yahoo, leading the webspam algorithms team there.

The list isn't exclusive, just the people identified by Satya's blog post. They're an impressive collection of natural user interface experts and visionaries who are coming to a company that desperately needs to rediscover its technical heritage and leadership.

Most importantly, they have expertise in areas of search that could be applied in areas where Google hasn't yet conquered. Maybe that's the endgame Microsoft can win. The mobile phone is the next big search platform, the one that will by comparison dwarf PCs. There's a reason why last week I got a Powerset PR pitch about iPhone.

Who will really want to type in keywords on a cell phone? That's going to be no way to search. Speak search? Oh, yeah. Natural language search makes a helluva lot of sense on cell phones. And Microsoft just added a hell of a crew to its Live Search core Search Relevance team.

Microsoft Pumps Your Gas

2008-07-03T11:36:00.000+05:30

I've heard Windows Vista called a gas guzzler, which pumps a little irony into Microsoft's newest contest.

Today, Microsoft Small Business formerly announced a marketing campaign/contest to give away 5,000 gallons of gasoline. With gas prices near five bucks in some places (like Southern California), Microsoft is encouraging businesses to stay at work and collaborate or conference online.

I initially resisted blogging the gas giveaway, which I read about early this morning in a post on the Microsoft SMB Community blog. Eric Ligman, senior manager for Microsoft Small Business Community Engagement, wrote:

"We want to make sure small businesses have the information they need to make smart decisions about cutting costs and becoming more efficient. As a first step in this effort, we are offering 5 money-saving ideas and the opportunity to win 5,000 gallons of gas at BumptheSlump.com. So, check it out, enter to win and remember to pass along the good news. Your customers will definitely love you for pointing them to the gas giveaway and may even want to tap into your small business technical expertise about some of the money-saving ideas."

Ad agency Bradley and Montgomery created the advertising campaign, which apparently is just a first effort. Coming in July: A SMB social networking site, according to PR e-mail sent this afternoon. What? Facebook or Windows Live Spaces aren't social networking enough?

Oh, I almost forgot: The contest can be found at bumptheslump.com. I totally barfed my coffee when seeing link "Stack the deck. Send this to all your coworkers." Yeah, right. Like I want to spam everybody.

By the way, the contest's fine print indicates it's not really gas but "Shell prepaid gas cards." Also: "Open only to small businesses legally domiciled in the 50 United States (includes D of C) that have between 2 and 100 employees. Game ends July 18, 2008."

What I don't get: The rules say the contest started on June 19. OK, so why is Microsoft publicizing this thing today? I love this: The gift cards are $250 each, for a 5,000 gallon total with an "approximate Retail Value (ARV) US $20,350.00 based on AAA US national average of $4.07." Say, what? Average gas price here in San Diego today is $4.59. But Microsoft's not getting off easy. U.S. government stats put the national gas price average at $4.09 today.

As for gas guzzling Vista, I referred to its heftier hardware requirements as compared to Windows XP.

Microsoft Reaches Interoperability 1.0

2008-07-02T20:24:00.000+05:30

Today, Microsoft announced the release of more interoperability information, including legacy, Office binary file formats.

The updated protocol information is available here, on the MSDN (Microsoft Developer Network).

Microsoft also released final protocol information for 2007 versions of Exchange Server, Office 2007 and SharePoint Server. The information moves "from preliminary to 1.0 stage," Craig Shank, Microsoft's general manager of Interoperability, told me on Friday. "We're at a stage where we have a high degree of confidence in it."

Say what? How the hell do you have a 1.0 release of protocol information? So, what, the earlier release was beta? I didn't think of these questions until writing this post, otherwise I would have directly asked Craig last week. Because I wonder: How can somebody develop around protocols that are released but really are incomplete, let alone license them?

Microsoft released preliminary protocol information in April. The 1.0 designation reflects changes incorporated based on community feedback. I wonder how much feedback Microsoft got on licensing terms, which are unchanged.

The protocol information is free to use for non-commercial purposes. But people developing commercial products pay—and if not, their customers do. It's sensible that Microsoft charges for its patented technologies. But European Union sanctions demand free use of server protocol information for open source and free software, a concession Microsoft hasn't made. It's one I expect the company will never make.

"There isn't a cost to learning more," Craig said. "The documentation is posted to MSDN. Anyone can read anytime. Better yet there's a set of forums."

I probed Craig a bit about to see how far Microsoft would pursue non-paying commercial users. Microsoft gives away development tools to college students. What if someone develops an application that goes from free to commercial? I used example of a student charging others for a social networking app using Microsoft protocols. Craig emphasized the difference between a commercial enterprise and a student making "nickels for beer money. I'm not sure that's the most useful way to do the analysis."

Fair enough. Microsoft doesn't want to nickel and dime students out of their nickels and dimes.

Besides protocols for newer products, Microsoft also released information for Office binary file formats, such as .doc and .xls. Enterprises have mountains of valuable data locked away in these older formats. Their interoperability deserves consideration, too, and not just among Microsoft and third-party technologies. The protocols should allow enterprises to better extract meaningful data from older Microsoft file formats.

Microsoft also disclosed patent information. "It is patents that cover those protocols that we're publishing," Craig said. Because of licensing considerations, I asked if information included patents from other companies. "It is Microsoft patents," he affirmed.

Questions remain about Microsoft's interoperability sincerity, whether the company feels forced—by market conditions or European regulators—or has simply changed its ways.

"I would evaluate based on the documentation itself," Craig said. "I would suggest that a serious implentator would roll up his shelves and dive in."

Thoughtfully listening to his responses, I got to thinking about other companies' protocol information publishing. For all the criticism of Microsoft, I can't think of another high-tech company disclosing near as much information. So I asked Craig about other companies publishing protocol information.

"I would love to see others follow our leadership on this," he said.

Microsoft.com Goes Virtual

2008-07-01T10:48:00.000+05:30

Now this is what corporate blogging is supposed to be about.

Today, Rob Emanuel, a Microsoft technology architect, blogged about Microsoft using Hyper-V technology for Microsoft.com. He earlier blogged—and much more briefly—about using Hyper-V Release Candidate 0 for the MSDN and TechNet sites.

Presumably, Rob's post supports today's Hyper-V release to manufacturing. I didn't see the blog post until this morning (it wasn't there at midnight Pacific time), even though it has a time stamp of 4:38 p.m. PDT yesterday. I assume that Rob simply forgot to update. Too many pesky blogging systems label time when a post is created, forcing the blogger to manually update time and date later on.

I love it when Microsoft employee bloggers describe how the company's dog food is caviar—and that's meant as a compliment, by the way. Microsoft is quick to use its own technology, but it's not as fast telling other people about it. That's changing, and Rob's post is indicative of the trend. The best Microsoft case study is Microsoft.

Rob has put together a nice, concise primer, including Microsoft.com site stats and deployed hardware. Companies like Microsoft don't easily disclose this kind of information. There are competitive and even security considerations, which make the post's existence that much more impressive.

As of today, Microsoft has "25 percent of production traffic" running on Hyper-V, Rob blogged. "Based on these results we are ready to fully host www.microsoft.com web servers on Hyper-V and we're targeting end of June for 50 percent of the load. As soon as we complete deployment of our new hardware infrastructure in diverse data centers, we'll complete the full virtualization."

I don't want to excerpt too much from the post, but these statistics are worth calling out: Microsoft.com "handles 15,000 requests per second, 1.2 billion page views per month, and 280M worldwide unique users per month as well as supporting ~5000 content contributors from within the company," Rob blogged. "This site has close to 300GB of content consisting of some seven million individual files on each server."

Microsoft transparency is best when the company opens up the soul of its own IT operations. No case study is better than Microsoft.

Around the World in Less than 180 Days

2008-06-30T20:19:00.000+05:30

When is late early?

This morning, Microsoft announced that its Hyper-V virtualization technology had released to manufacturing. From one perspective, the software shipped late, because it missed the February 27 launch of Windows Server 2008. Looked at another way, the software is early, because the RTM was less than the previously stated "released within 180 days." RTM is more like 120 days, or two months early.

The first rule in any kind of product marketing: Promise one thing and deliver something more. Or as my former JupiterResearch colleague Michael Gartenberg often says, "Under promise and over deliver." I expect there will be many "early" blogs and news stories about Hyper-V today, even though the software is late. Still, Microsoft deserves credit for making up so much development ground so fast. Kudos.

That said, two months early understates just how quickly Microsoft moved out Hyper-V. This morning, I spoke with Mike Neil, general manager of Microsoft Virtualization, about the release timetable. Hyper-V is "available today from Download Center." Microsoft had been indicating August availability just a few months ago.

So it's not August, not third quarter, not second half. Microsoft really released Hyper-V in the first half of the year. That's unusual, given in Microsoft parlance, release almost always means release to manufacturing, with availability some weeks later. "I've been consistent [about] 180 days, and I've always said within," Mike emphasized.

Maybe Microsoft's Server and Tools division had some other pressure—another deadline driving development to reach quality goals early. "It was good to slip this one [in] under the reign of Bill Gates," Mike said. Tomorrow is the Microsoft chairman's last day as a full-time employee.

For those enterprises not wanting to manually download Hyper-V, "on July 8 we will make it available through our Windows Update process," Mike said. The software has already been validated by OEMs for more than 200 systems, he added. Microsoft has expanded the list of supported operating systems, which now includes Windows 2000. See the list.

Windows Server 2008 shipped with the Hyper-V beta, which Mike said most enterprises should be able to easily update manually (through Download Center) or automatically (through Windows Update). The "how easily" should be known shortly, as enterprises begin to deploy the virtualization software.

Hyper-V comes at a time when more enterprises are putting more emphasis on virtualization. According to a recent eWEEK survey of 402 IT decision makers, 32.1 percent of enterprises will have deployed virtual desktop infrastructure by year's end. Meanwhile, 22.3 percent of enterprises will have deployed application virtualization.

Gartner predicts the number of deployed virtual machines will rise from 540,000 at the end of 2006 to more than 4 million in 2009. The major driving force—as in 90 percent of users—is server consolidation.

Many enterprises are consolidating servers in a massive trend not seen in a decade. Sun hugely benefitted from late-1990s server consolidation leading up to the so-called Year 2000 crisis. Mike Neil rightly observed that the TCO concerns drove the last decade's push to consolidate. The reasons are much different today: green computing, as IT organizations seek to reduce energy consumptions and costs related to cooling data centers, regulatory compliance and mobile computing trends, among others.

Pricing is unchanged from earlier announcements. Windows Server 2008 SKUs with Hyper-V cost just $28 more than those without. The price of the additional benefit might not seem much to customers but it could mean more to Microsoft and its partners. Hyper-V inclusion could snatch away potential customers from VMware, among other virtualization developers.

With previous Microsoft virtual server software, businesses had to license two virtualization instances, one for the server partition and another for the applications. Microsoft has modified licensing such that customers pay for only one virtualization instance.

Circling back to this blog's title—headline, if you prefer—and play off the Jules Verne novel, "Around the World in Eighty Days": Server and Tools is rapidly emerging as Microsoft's can-do division. According to a Forrester report published on Friday, "80 percent of firms cite the Redmond software giant as their primary server OS vendor." The division has posted more than 20 consecutive quarters of growth.

At a time when Microsoft's co-founder is stepping aside and CEO Steve Ballmer has sales and marketing executives running the company, it's interesting to see the division with best execution is run by a technical leader—Bob Muglia.

Mike Neil is in the right place, and he knows it—at least for June 26, 2008: "I'm the happiest guy at Microsoft," he said.

With or Without Yahoo

2008-06-29T11:07:00.000+05:30

Online advertising is going to be big, big, big. An IDC forecast indirectly explains why Microsoft didn't let Yahoo go easily.

The analyst firm estimates that Internet advertising spending will reach $65.2 billion this year, and it will increase to $106.6 billion in 2011. Annual estimated growth rate: 15 percent to 20 percent. Impressive, but still small. IDC said that Internet advertising would only account for 10 percent of spending across all media categories this year and 13.6 percent in 2011.

Fortunately for Microsoft, because so much ad money is spent offline, there's still time to get search and online advertising right, with or without Yahoo. Now that could be a U2 song revisited:

See the stone set in your eyes
See the thorn twist in your side
I wait for Yahoo

Sleight of hand and twist of fate
On a bed of nails she makes me wait
And I wait without Yahoo

With or without Yahoo
With or without Yahoo...

And you give yourself away (to Google)
And you give yourself away (to Google)
And you give
And you give
And you give yourself away (to Google)

You get the idea. Microsoft has got to go on either way.

Here's where the "without Yahoo" hurts: Keywords will account for a whopping one-third of online advertising spending through 2011, according to IDC. Combined Microsoft-Yahoo search would have given Microsoft at least a fighting chance against the Google keyword machine.

Something else: IDC said display advertising would account for 20 percent of worldwide ad spending over the next three years. Display advertising is a category where Yahoo actually does well (and Microsoft is doing better).

Microsoft has been throwing out number $80 billion for Internet ad spending by 2010. I stand corrected. I faulted Microsoft's math, but IDC's estimates make that $80 billion just about right.

IDC's forecast is yet another slap in Microsoft CEO Steve Ballmer's face. He wanted Yahoo but ended up driving the dot-com pioneer to give itself away to Google—by way of an ad-and-search sharing deal.

I still contend that from an integration perspective, Yahoo would have weighted-down Microsoft to Google's advantage. But reasons for an acquisition look surprisingly stronger now then they did when Microsoft withdrew its acquisition offer:

Billionaire Carl Icahn's proxy fight is absolutely undermining the credibility of Yahoo's board (as I said that it would).
Important executives are leaping overboard as Yahoo takes on water (I keep thinking of the scene in "Titanic" where steerage passengers follow fleeing rats).
Yahoo's executive leadership—once fired up to revive the company—is looking more directionless.
In context of the aforementioned problems, Yahoo's stock is finally nearing free-fall.

Microsoft may yet have a chance to pick the search business from Yahoo's rotting bones, although I maintain my opinion that Microsoft's unsolicited takeover hugely contributed to Yahoo's current plight. Before Microsoft's bid—and even a few months afterwards—I saw Yahoo CEO Jerry Yang as steering the company to recovery. I'm no longer confident that he can do it, based on where Yahoo is in the nearly two months since Microsoft withdrew the offer.

Microsoft's alternative, selling search, would have lobotomized Yahoo. But if the body is going to die off anyway—and slowly—maybe a brain transplant would be a good solution. Saving search would preserve something. I must qualify: That's a sensible strategy only if Yahoo can't survive intact. In which case, it's time for Yahoo to fill out that organ donor card, with Microsoft designated as the recipient.

Yahoo's survival and whether or not Google or Microsoft gets some of Jerry Yang's company is an important topic in context of IDC's numbers. While Google, Microsoft and Yahoo are perceived to be competitors, they are not in the greater advertising context. The amount of ad money spent everywhere else, dwarfs Google's online advertising and search dominance.

Google-Microsoft-Yahoo competition is really about jockeying for position to better compete with offline ad spending and to make the biggest bucket for catching those advertising dollars when they finally move online. Right now, Microsoft has a puny bucket compared to Google. According to ComScore, in May, Google's share of worldwide searches was 61.8 percent, compared to 8.5 percent for Microsoft.

Microsoft still has some time, as long as so much ad spending goes offline. It's the bucket's size in three years or even five that will matter more.

Microsoft's 2008 problem: Its bucket wouldn't be as big as Google's, with or without Yahoo.

Don't Yell 'Yahoo!' So Fast

2008-06-28T13:50:00.000+05:30

If Microsoft and Yahoo CEOs accidentally meet in the same trade show bathroom and say "Hello" to one another, have they renewed merger talks?

Need I answer?

Yesterday's renewed Microsoft-Yahoo merger rumor, spurred on in part by TechCrunch's Michael Arrington and debunked today by BoomTown's Kara Swisher, is ridiculous.

I didn't blog the rumor earlier because I didn't believe it, and the major blog reporting the renewed talks has an increasingly bad record for accuracy, recently anyway. TechCrunch is doing a good job of seemingly rushing to be first to blog before checking accuracy. I would be more understanding if there were retractions or corrections.

I suppose Kara could be wrong, except that her reporting on the Microsoft-Yahoo merger has been outstanding and TechCrunch gaffes have me questioning most every post. Anybody recall last month's fake Windows 7 screenshots blasted out to the world as being real? They weren't. There are plenty other examples, but that's the best other Microsoft-related one that comes immediately to mind.

As someone who worked as a lawyer, Michael should know something about negotiating tactics or leaks used as a means of manipulating share prices.

Joe's rules for interpreting negotiation rumors:

1. Nobody talks.
2. Nobody talks.
3. Nobody talks.
4. An associated party only talks when the negotiations aren't going well and one side or the other wants to influence the discussion or end it.
5. Disassociated parties talk when they have another agenda, like influencing stock price of one or both companies.

Nobody talks unless they want something, which makes what they say susceptible. And there is someone here with a really big agenda, billionaire businessman Carl Icahn, who has waged a proxy fight to oust some Yahoo board members, starting with CEO Jerry Yang. Then there are other shareholders disgruntled with Yahoo. Other parties might want to boost Yahoo shares, which recently nipped $20 in their downward spiral. With so many people with possible interest in influencing Yahoo, any unnamed source's reliability should be questioned.

Michael wrote today:

"We've got multiple sources at both Yahoo and Microsoft telling us that official talks are back on between the two companies. But we're hearing something different than CNET—the talks are about a full buyout again, not a sweetened search-only deal."

To his credit, Michael did update the story as new information emerged, but much of it came from other news services. But unnamed sources are the worst kind for a story about the possible merger of two public companies that are hugely influential in their respective market segments.

By the way, at least CNET News.com identified a "major investor who has been in contact with both parties" as a source. But a major investor is a weak source, given the potential conflict of interest here.

Kara wrote yesterday:

"You did not hear it here first, because BoomTown suddenly got the exact same calls too yesterday—coincidence? I think not!—from 'sources' touting Microsoft-Yahoo as 'back on.' I simply could not confirm it to our site's standards of reporting. Which is to say, aiming for trying to report with full accuracy versus repeating errant chatter that is so typical now in this deal."

A Microsoft-Yahoo merger could yet happen. In fact, I detect some desperation on the part of Yahoo. It wouldn't shock me if it was Yahoo banging on Microsoft's door and being rebuffed, in an interesting role reversal. But that's my conjecture. I don't have and wouldn't use unnamed sources about renewed Microsoft-Yahoo talks.

Church Package: Devil in the Details

2008-06-27T20:10:00.000+05:30

Whoa, is it the wrath of God or Gates?
Long Zheng blogged about Microsoft's "Holy SKU." It's just too funny, and yet prophetic: Microsoft has got one of the most diversified channels on the planet—and that's a good thing. Strong channel is one of the legacies Microsoft Chairman Bill Gates will leave behind.

"Microsoft Church Package" is a great example of Microsoft's channel at work. Where else could you find a bunch of products from the same company packaged together for the clergy, other than Microsoft's channel or from South Korea? Last time I checked, the world's largest Christian church is in South Korea.

The "Church Package" is loaded up with plenty of productivity apps for drafting and delivering fire-and-brimstone sermons from the pulpit: Expression Web, Office Standard, OneNote, Publisher and Visio. In my experience, ministers do well with just PowerPoint.

I do wonder about the ridiculously low pricing. Do God's people get better pricing than you or me? Well, God certainly might have some advantages negotiating licensing pricing with Microsoft. This entire package sells for 199,000 Won, or about $190 U.S.

Couple years back, my wife took a couple Korean classes at the Korean Embassy in Washington. D.C. I wondered if maybe the pricing was for upgrades—still one ~~hell of a~~ heavenly deal—but she couldn't translate the sales copy.

Microsoft Church Package looks like a short-term promotional, ending June 30. Maybe God and Gates cut a good deal. But $190? Surely, nobody would be so bold as to advertise pirated software, would they? And sold to churches? I'm not suggesting piracy, just asking about it. But, hypothetically, if pirated, watch out! I'd worry more about the wrath of Gates than the wrath of God.

XP: Microsoft Does the Right Thing

2008-06-26T14:32:00.000+05:30

The letter (PDF) from Bill Veghte, senior vice president of the Online Services & Windows Business group, affirms that after June 30 Microsoft will suspend OEM distribution of Windows XP. The extension some people advocated isn't happening. Good. As I've expressed before, Microsoft can't get XP out of the OEM channel fast enough.

But vestiges of XP distribution will continue, since system builders can continue shipping the operating system through Jan. 31, 2009. They acquire the software from distributors. Now this is interesting: "All OEMs, including major OEMs, have this option."

As I previously explained and Bill affirms, businesses have two downgrade rights options, which work similarly with Windows Vista as they did with Windows XP. Volume licensing subscribers can "downgrade" from the Vista preinstalled on their PCs to XP. He also affirms something already announced by Dell and HP:

Some of our OEM partners are planning to offer services designed to help business customers that buy these versions of Windows Vista on new PCs to exercise their downgrade rights. This is a great value because it lets you use Windows XP on new PCs today if you need it and then make the move to take advantage of the additional capabilities of Windows Vista when you are ready, without having to pay for an upgrade.

Some IT managers might define that "great value" as "I don't want stinkin' Vista."

Bill answers the important question that many businesses are asking about XP: Will Microsoft continue support? He writes:

We will continue to provide security updates and other critical updates for Windows XP until April, 2014. Our ongoing support for Windows XP is the result of our recognition that people keep their Windows-based PCs for many years and a reflection of our commitment to provide the highest level of support for all our customers.

There's a saying that confession is good for the spirit. Bill confesses:

The architectural changes that improved security and resilience in Windows Vista led to compatibility issues with existing hardware and applications. Many hardware drivers and applications needed to be updated, and while the majority worked well when we launched Windows Vista, some key applications and drivers were not yet available.

Some businesses still have compatibility problems, which is good reason to use those downgrade rights. But there's hope:

Free downloads like Adobe Reader and iTunes have versions that are optimized for Windows Vista. With the exception of devices that are very old, the vast majority of compatibility and driver issues have been addressed and customers are seeing a much improved user experience.

Bill goes on to espouse Windows Vista Service Pack 1's benefits and say absolutely nothing new about successor Windows 7. It's not like he would give 7's release date, but I could hope.

What the Heck Is Information Card Foundation?

2008-06-25T10:50:00.000+05:30

Capital One's marketing phrase, "What's in your wallet?" could soon be a digital metaphor.

Early this afternoon, Microsoft and four other establishing members—Equifax, Google, Novell, Oracle and PayPal—announced creation of the Information Card Foundation. The group seeks to improve online identity and privacy through use of a wallet metaphor.

Quick take: ICF is really a marriage of necessity between Microsoft identity and privacy work and an earlier open-source identity project; it's yet unclear to me how much influence Microsoft and its technologies will have on the organization. The group's loftier goal isn't the one being taken on today: enabling privacy and security for mobile transactions.

ICF's immediate goals are simple: to better enable online transactions, while protecting the privacy and security of the consumer on one end and the service provider on the other. The metaphor: a digital wallet containing online identification cards that acts as a single place to log into and transact with disparate online sites or services. Through that motif, ICF aims to better protect people's privacy and identity, while curbing phishing and other online scams.

Something else, before more broadly discussing the new organization: Almost certainly related, Microsoft has consolidated its Access Security and Identity and Access divisions into new organization Identity and Security division. Ryan Hamlin, former general manager of the Access Security division, takes on responsibility for the combined entity. Douglas Leland, former general manager of Identity and Access, will assume a worldwide business leadership role, whatever that means. The new division will be responsible for Microsoft technologies Active Directory, CardSpace, Forefront, Identity Lifecycle Manager and Rights Management Services.

ICF Primer
Microsoft provided what is at least a partial ICF board of directors list: Parity's Paul Trevithick as chairman, Kim Cameron from Microsoft, Patrick Harding from Ping Identity, Ben Laurie and Andrew Hodgkinson from Novell, Meristic's Mary Ruddy, and Drummond Reed and Pamela Dingle of the Pamela Project.

ICF incorporated on March 1, but its coming-out party, so to speak, is today. Discussions on forming the group started about 12 months before incorporation.

I notice that while ICF claims Equifax, Google and PayPal as founding members, their executives aren't listed as board members. Now why is that? Perhaps no coincidence, most ICF board members come from companies supporting Microsoft technologies, such as CardSpace. I make the distinction for clarity purposes only. ICF's press announcements indicate broad industry support and lofty interoperability goals, but not without Microsoft's heavy hand in the process—or so I perceive. To be clear: I don't suggest that's a good or bad thing; some Microsoft Watch readers will surely pick one or the other in the comments. My objective is to cut past any marketing propaganda.

By the way, Information Card in the group's title should be a dead giveaway of Microsoft's involvement and influence on the new organization. Information Card is the metaphor best associated with CardSpace.

But ICF is bigger than Microsoft, and that's an important distinction to make here. The group might be best described as a marriage of convenience between the Higgins Project and Microsoft technologies.

On Friday, June 20, I spoke with board members Paul Trevithick, Parity CEO, and Kim Cameron, Microsoft's chief architect of identity. Paul said ICF's roots go back five years to Higgins. ICF's identity and privacy platform will incorporate many Higgins mechanisms or metaphors, such as "identity selector." The platform also will support CardSpace and WS-TRUST, among other security technologies and protocols.

Paul described Higgins as "an open-source implementation of the Information Card as well."

I felt that Paul and Kim kind of brushed past my questions about architecture and whose technology would provide the underpinnings. Perhaps that's something they can't yet answer, or I failed to understand their meaning, or they didn't want to say that Microsoft would be a major influencer. I can't definitely say, because as I write this post the ICF Web site isn't yet live. That's where I expect to see more information on the architectural objectives.

Both men emphasized the importance of interoperability. "[We] need to make an identity layer for the Internet," Kim asserted. He said it can't be tacked on to what's out there already. "You need a really good architecture," he said, and "the architecture has to be provided by the industry and across geographies if this thing is going to work."

When I pressed on architecture, Paul responded: "We focus more on there being a consistent user interface on the top and interoperability on the wire then agreeing on a software architecture."

That statement really cuts to it. Based on the information that Microsoft provided and the nearly hour-long interview, I conclude this: ICF's main technological focus is top-layer infrastructure, which includes the main privacy and security metaphor and supporting protocols. Vendors would implement broader underpinning technologies, using guidelines and protocols adopted by ICF for the purpose of ensuring interoperability. Example: OpenID and Windows Live ID as authentication mechanisms used by different sites or services for different cards in the wallet.

Wallet as Metaphor
An Information Card and Higgins' "identity selector" really make up the core metaphor, the digital wallet containing different authentication cards.

"Your Identity Selector is like a wallet," Kim said. The wallet would contain digital identity cards for simply and securely logging into or transacting with different online sites or services.

I also spoke with Charles Andres, ICF's executive director, on Friday. "The Information Card metaphor is an excellent one" because it represents "transactions in the real world," he said.

I wondered how the heck the metaphor could be consistently offered across disparate platforms and devices. "The selectors can be baked into the operating system or put in a browser," Paul said. Kim chimed in: "Architecturally, [the wallet] could be anywhere. It could be on the operating system. It could be in the cloud."

Operating system placement would give Microsoft huge customer traction, simply because of Windows' huge install base.

I struggled to grasp the wallet metaphor in part because of the number of supporting identity and privacy technologies and how the Information Cards would drastically differ from those carried in a physical wallet. The two things are related, as they introduce unforeseen complexity to an approach that is arguably better than anything else broadly available today.

"There may be one wallet, but the cards don't contain the data," Paul said. "The issuer decides what kind of authentication that card requires." From security and service provider choice perspectives the approach is sensible. But won't different authentication mechanisms create confusion? The two ICF board members said no.

"Any kind of a token can be delivered," Kim said. "Most of us are using SAML tokens right now." SAML is Security Assertion Markup Language.

I asked what happens if the wallet is stolen, meaning someone other than the legitimate user gains unauthorized access? "Having access to the wallet doesn't necessarily mean access to everything in the wallet," Kim replied. "[Users] might have to enter a PIN. It's a cross between a wallet and an ATM." The service provider or Web site would decide what the second or even third authentication mechanism might be.

Different cards representing different things are important, not confusing, Kim asserted: "People want contextual separation between their banking and their lovemaking and everything else. The wallet idea [encapsulates] these different concepts. We've been very careful not to create links across the different contexts that you're in."

Mobile Transactions
The three men got some geek glow when I started asking, and theorizing, about the mobile market. With manufacturers shipping more than 1 billion handsets a year, the logical, primary identity and security platform should be the cell phone.

"It's very important that the Information Card is not just a PC phenomenon," said Kim. A statement like that means something coming from a Microsoft executive, whose company is best identified by the Windows PC.

"Mobile is a very exciting place. We want to make this thing run on [any cell phone]," Paul said. Oh, yeah? What about iPhones? Paul said ICF has spoken with Apple, but he insinuated that nothing much has happened yet. Definitely, the iPhone is a device ICF would like to support.

I asked about the mobile phone as being perhaps a better device for achieving ICF's privacy and security objectives, because of how its existing technologies could be used—everything from video capture to voice to GPS.

"Phones have a number of wonderful characteristics, [such as] facial recognition [and] voice recognition," Paul said. The mobile market isn't just about better security and privacy features; there is basis for broader acceptance of the wallet metaphor and underlying technologies. "The effort to get the selectors on mobile devices will [drive adoption]," Paul said.

Gates-Ballmer Succession Watch

2008-06-24T10:36:00.000+05:30

Who should be Bill Gates' technical successor at Microsoft?

It's not CEO Steve Ballmer, who at last month's D6 Conference admitted, "I am not an engineer." I'll say. Steve is a marketing guy who has put other marketing guys in charge of Microsoft.

Should it be Bill's handpicked successors, Chief Software Architect Ray Ozzie or Craig Mundie, chief research and strategy officer? For an upcoming eWEEK story about Microsoft after Bill Gates, I asked several analysts about the logical technical successors. None mentioned Craig, while some worries defined Ray's possible Microsoft future.

Forrester Research analyst Rob Koplowitz described Ray as a "brilliant technical visionary." Problem: He "might still be a bit of an outsider after just a few years. Also, he was Gates' man, and with Gates gone ..." Koplowitz didn't finish the sentence. But the implications are hugely important. It wouldn't be the first time I've heard concerns that Ray isn't Ballmer's man.

Several analysts surprised me with their pick for technical successor: Bob Muglia, senior veep of the Server and Tools division.

"Bob Muglia particularly stands out because his organization is profitable, growing in double digits, is facing tough competition against open-source alternatives, and is a major factor backing Windows and Office on the desktop," said Directions on Microsoft analyst Rob Helm.

Koplowitz described Muglia as a "technical genius like Ozzie, but with better Microsoft cred."

Roger Kay, president of analyst firm EndPoint Technologies, shared similar sentiments. "I've been spending time with Bob Muglia, and I think [the Server and Tools business] is the most functional unit at the company. It's a $13 billion business dropping $4 billion to the bottom line."

He continued: "It's responsive to its customers and lives in a competitive environment. Bob motivates his troops and inspires confidence in his customers. I think he continues to do what he does in a post-Gates world. STB could almost split off as a stand-alone company, but it does share some technologies with other units."

Server and Tools certainly is having a busy year, with releases of Visual Studio 2008, Silverlight 2, Windows Server 2008, Hyper-V virtualization, SQL Server 2008 and new "Essential" Server products. While the division's margins are smaller than the Office and Windows (e.g., Business and Client) groups, year-over-year growth is consistently stronger and contribution to sales of volume-licensing contracts is more significant. Server and Tools products will also drive new Microsoft hosted services.

Where Client is doing OK—hampered by Windows Vista—and Business is doing well, Server and Tools' performance is exceptional. According to a Forrester report published on Friday, "80 percent of firms cite the Redmond software giant as their primary server OS vendor." The division has posted more than 20 consecutive quarters of growth.

Bob took over Server and Tools in October 2005. It has been boom time pretty much since, building on an already strong foundation and diversifying into new areas, such as hosted services.

But he's not alone as the man who could wear the Gates mantle, or at least share it sometimes. Other future technical successors the three analysts said to closely watch:

Steven Sinofsky, senior vice president, Windows and Windows Live
David Thompson, corporate vice president, Microsoft Online
Bill Veghte, senior vice president of the Online Services & Windows Business group
S. Somasgear, senior vice president, Developer division
Kurt DelBene, senior vice president, Office Business Platform group
Chris Capossela, senior vice president, Information Worker Product Management group
Satya Nadella, senior vice president, Search, Portal & Advertising group
Stephen Elop, (incoming) president, Business division
Scott Guthrie, corporate vice president, .NET Developer division
Eric Rudder, senior vice president, Technical Strategy
Rick Rashid, senior vice president, Research

Why does this post's title include Steve Ballmer? Because Microsoft has in place no clear successor to its CEO, and it's unclear whether marketing execs should be running a company with such strong technical expertise. As for Bill Gates, today begins his last week as a full-time Microsoft employee.

Microsoft Licensing: Get Smart!

2008-06-23T10:30:00.000+05:30

Surely there is some hidden meaning to Forrester Research releasing a new Microsoft licensing report the same day the movie "Get Smart" opens.

"Successfully Negotiating Microsoft Licensing Agreements" doesn't mention the movie, but it should. Because many Microsoft customers are either Maxwell Smart or Agent 99. The bungling Smart might get a good deal by accident, but it's Agent 99 who is all business and the shrewder operator.

Timing is important for another reason. It's the time of year when the most licensing agreements are up for renewal, through July 31, particularly.

Report authors Duncan Jones and Christopher Voce are clear that negotiating licensing with Microsoft can be arduous, in part because of the "unique terminology, complex pricing structure and rapidly changing product portfolio" that "can confuse unprepared negotiators." They emphasize that "preparation is key to success."

I won't review all, or even most of, the report's contents. Forrester charges clients for reports. It's not my place to give away all the contents for free. From Forrester's report and my own research, I want to provide four things enterprises must be aware of when negotiating Microsoft licensing renewals.

Microsoft negotiates aggressively, and not necessarily fairly. Fair is a subjective term. What seems fair to you might not seem fair to Microsoft. To Microsoft, fair starts with getting paid for every single license, and the company is quick to use noncompliance as a negotiating tactic.

Enterprises must make sure that every single license is accounted for before sitting down with Microsoft reps to negotiate new contracts. The report authors warn: "Companies that own up to noncompliance will see some ï¬‚exibility, while those that try to hide it from Microsoft can lose some significant potential discounts or concessions."

True, maybe, but the better position is assured full compliance and ability to negotiate from strength. Because of an enterprise's potential legal liability, Microsoft can use noncompliance, even admitted, to gain concessions. Get smart. Be compliant.

Last-minute negotiations can weaken bargaining. Some businesses are disorganized or simply waiting, hoping to pressure Microsoft into cutting a better deal. But time is two-edged. The report authors explain: "Some reps may even try to use your deadlines against you, forcing you to sign suboptimal deals because you can't afford to let [Software Assurance] lapse or delay a major project."

Get smart. Plan ahead, but don't be hostile. The report authors warn: "Buyers should not let the negotiation become overly adversarial by assuming that Microsoft is out to mislead or bamboozle them with artificial complexity." Let Microsoft make the mistakes, not you.

Microsoft wants you to buy as much as it needs. Most enterprises upgrade, at best, on three-to-five year cycles. But long upgrade cycles aren't good for Microsoft's bottom line. The company wants recurring revenue from annuity contracts—and that means Software Assurance added onto Open or Select agreements or paying for Enterprise Agreement.

Bottom line: Software Assurance requires an extra-cost commitment, annually, 29 percent of the desktop software cost and 25 percent for server products, typically for three years. The break-even point is three-and-a-half years. After that, it's cheaper paying full price. Microsoft provides incentives, like support and training, to attract annuity contract sales, which won't suit enterprises only interested in discounted software.

That said, Microsoft has aligned product cycles with annuity contracts. Some enterprises may want a product's interim version, or what Microsoft calls "R2." Software Assurance customers get the software for free. Everybody else pays.

Get smart. Only buy as much software upgrade protection as needed.

Microsoft wants to help you buy more of its stuff. Both sides benefit when the enterprise thinks in terms of the big picture. From the Forrester report:

Successful Microsoft contract negotiations go beyond the line item costs and consider the additional consulting and support services available. For example, if a sourcing team's organization is embarking on a Vista migration, Microsoft might be willing to throw in discounted planning services and training—items that could have a material impact on the overall IT budget.

Get smart. Identify products you need that Microsoft really wants to sell. Vista's not doing well, so it's a good starting point for deals that ease deployment costs or acquisition of supporting software. Enterprises can expect Microsoft dealmaking for SharePoint Server 2007, Windows Server 2008 and Hyper-V. Any company even considering virtualization deployments should negotiate hard for planning, deployment and training services.

DOJ Has Windows 7, Why Not You?

2008-06-22T11:18:00.000+05:30

Here's something Microsoft probably didn't want more of: government oversight of Windows development.

Windows 7 already is being reviewed by U.S. government technical appointees, something many Microsoft executives probably couldn't have much imagined happening a year ago.

Under the terms of Microsoft's November 2001 Justice Department settlement and final court judgment issued about a year later, a government-sanctioned "Technical Committee" has overseen Windows development. The TC is responsible for ensuring that Microsoft complies with the terms of the final judgment, investigating complaints about Microsoft abuses and regularly reporting on the company's compliance.

The TC required some changes before the operating system's release. Each quarter, the Justice Department, Microsoft and states' attorneys general file a joint "status report," largely based on the TC's activities. The process should have mostly ended on Nov. 12. But Google (and some other Microsoft competitors) requested an extension, and U.S. District Judge Colleen Kollar-Kotelly gave it to them: two more years of government oversight.

So Microsoft finds itself in the uneasy position of having the TC look over its shoulder during Windows 7 development. Don't get too close, TC, because Microsoft has a big body bubble—that invisible surrounding comfort zone. On June 17, the day I went out of blogging service because of a catastrophic hard drive crash, Microsoft and government trustbusters filed a new status report. So I'm blogging a day late and a couple gigabytes short. From the document:

Microsoft has recently authorized TC access to another early build of Windows 7 (the successor to Vista), which the TC will review. As the builds of Windows 7 progress, the TC will conduct middleware-related tests in an effort to assure that bugs fixed in Vista do not reappear in the next operating system, as well as to assure final judgment compliance generally.

The evaluation is revealing. It's my contention that Microsoft plans to ship Windows 7 for holiday 2009—rather than in 2010 as some pundits surmise—and release a developer preview in October (to coincide with the Professional Developer Conference). The TC evaluation fits nicely with such a release timetable.

The Technical Committee is most concerned with the four categories of so-called middleware covered under the court's final judgment: e-mail, instant messaging, media playback and Web browsing. There appears already to be some contention about middleware defaults. From the court filing:

The TC's on-going review of Windows' treatment of middleware defaults is being expanded to include an operating system source code scan in an effort to determine whether some commonality in the code accounts for default overrides. The TC also is investigating certain default browser overrides, which Microsoft asserts arise from reasonable technical requirements that competing browsers apparently do not implement. The TC will discuss its findings with Microsoft once this inquiry is concluded.

The are more upcoming goodies being reviewed. "Microsoft has released publicly a beta version of IE 8," according to the court filing. "The TC is testing the beta, and familiarizing itself with the operation of IE 8's more significant new features."

Microsoft has to live with the review, but I can't believe that company executives like it. The settlement and final judgment impacted Microsoft in a way probably unexpected by trustbusters: The company all but abandoned development in three of the four middleware categories, with respect to Windows. Internet Explorer and Outlook Express development languished until 2004-2005, after Mozilla released Firefox and Thunderbird, and Windows Vista development pushed ahead in earnest. Meanwhile, Microsoft shifted its instant messaging development away from Windows—to Office Communicator for businesses and MSN Messenger for Windows. Vista dropped Windows Messenger altogether.

Today, with the exception of Internet Explorer, Microsoft is pushing the same so-called middleware down from Windows Live to the operating system. The ties are ever so strong, but the products and services aren't part of Windows by default. But I don't doubt that Microsoft executives would like them to be.

The TC reviewed Windows Vista, but its middleware assessment didn't satisfy Google, which complained about search defaults. Google's complaints led Microsoft to proactively change Vista search, action that partly precipitated the two-year extension of government oversight.

I see IE 8 as being hugely vulnerable to competitor complaints. Microsoft is making a godawful amount of Internet Explorer changes and taking risks with application and Web site compatibility. Surely somebody will try to interfere with the changes for competitive gain. Will it be Apple, Google or Mozilla? Opera has got a complaint in Europe already, why not the United States, too?

Microsoft Hears the MSN Music

2008-06-21T12:36:00.000+05:30

Some mistakes are tough to correct, even when trying to do the right thing.

In April, Microsoft sent Dear John letters to former MSN Music customers informing them that DRM servers would shut down on Aug. 31. The shutdown would mean that sooner or later—when depending on individual circumstances—former MSN Music customers would no longer be able to listen the tunes. Not surprisingly, Microsoft was sharply criticized for cutting off loyal customers.

Microsoft has changed its tune on MSN Music licensing servers. From a Microsoft statement sent to former MSN Music customers late yesterday:
"After careful consideration, Microsoft has decided to keep the MSN Music license servers running through at least the end of 2011. This means MSN Music customers will be able to transfer their music to new PCs and devices beyond the previously announced Aug. 31, 2008 date and continue to enjoy the music they purchased from MSN Music."

The extension was the right thing to do, but at the wrong time. Microsoft should never have moved to shut down the licensing servers in the first place. The earlier decision generated bad publicity and surely caused customer angst. Microsoft has got to step away from bean counter thinking. I'm sure from a bottom-line, pragmatic perspective, the licensing server shutdown made sense. But from a customer relations and public perception perspective, the decision was a disaster.

I periodically switch between Mac OS X and Windows Vista as primary operating system (I blog Apple Watch as well as Microsoft Watch). I've been primarily using a Mac for about two months, after four months of Vista. On Tuesday, June 17, the hard drive failed on my Mac notebook. After troubleshooting at the Apple Store Genius Bar failed to revive the hard drive, I was given a replacement computer. Now, that is customer service—how a company generates customer loyalty and good public perception.

Microsoft could have made the MSN Music situation a customer service win, as I suspect Apple would have. This is what I recommended in April and will do so again. Microsoft should offer Zune Marketplace tracks to MSN Music customers: It should reward loyalty by replacing their libraries. Make it an offer, not a requirement, so that people listening to MSN Music-purchased tunes on other devices can keep the music.

The replacement offer would benefit Microsoft and MSN Music content owners. Microsoft would move these people to the Zune Marketplace and to a possible future Zune music player purchase. Customers would get tracks recorded at higher quality and more options from Zune Marketplace.

I don't think there were that many MSN Music customers. What would be a few hundred thousand dollars or even couple million bucks to Microsoft? Goodwill money is marketing dollars at work.

Live Mesh Update

2008-06-20T11:24:00.000+05:30

Yesterday, Microsoft updated the Live Mesh Technical Preview.

This afternoon, I saw that Microsoft sent an e-mail about Live Mesh updates. I'm still playing catchup following Tuesday's catastrophic hard drive crash. Here are the updates, quoting directly from the e-mail:

"Live Mesh is now available in all English-speaking countries (not just the US)"
"Removed the User Account Control (UAC) requirement when installing and using Live Mesh with Windows Vista SP1."
"Index for Desktop Search now works with Live Mesh folders."
"Fixed bug where an underscore in a Hotmail account name returned an "Invalid Hotmail Address error."
"Fixed bug with Silverlight 2 Beta 2 failing to load in Silverlight Media View."
"Fixed bug where the notifier tooltip incorrectly indicated that Live Mesh Remote Desktop was unavailable for a computer running in non-admin mode."
"Fixed bug where the Live Mesh folder icon was not displayed in the e-mail inviting someone to share a folder."
"Fixed one of the bugs that caused Live Mesh to fail to start."
"Fixed problem with Live Mesh returning errors when waking from sleep/hibernate."

I'm still waiting for Mac support that's supposed to prove me wrong about Live Mesh's Windows-centricity.

Firefox 3 Scores 8

2008-06-19T12:53:00.000+05:30

Mozilla claims more than 8 million Firefox 3 downloads on release day. I wasn't one of them.

But I tried to be. The first barrier was logistical. Mozilla's download site simply wouldn't load. Even an hour after the download was released, the download page failed to open or gave an HTTP 1.1 error.

While trying to download the Web browser, I wrote a different version of this post. The original post snarked: Will you get carpal tunnel syndrome trying to download Firefox 3? That repetitive clicking is a killer. Maybe you're getting a new computer instead, after throwing your PC against the wall in frustration.

Frustration was about the most anybody got during the early part of Mozilla's so-called Download Day and attempt to set a world record for software downloads. In the hour after launch, the Twittersphere was one giant "I can't download Firefox" tweet, there were so many people griping about Mozilla's delivery problems.

MindTouch CEO Aaron Roe Fulkerson tweeted what I would have: "Dude ... how can I help break the world record if FF3 isn't out to download?"

Eric Shepherd, Mozilla's developer documentation lead, tweeted about 1 p.m. EDT (release time): "Servers died almost immediately after launch ... the IT robots are working on it."

About 2 p.m. yesterday, I finally was able to start downloading Firefox 3, at a sluggish 11k/sec. I wrote, but never posted, that if Mozilla was going to try and set a record, it would be best to have enough server capacity. I envisioned some other records Mozilla might set instead:

Number of tweets about a new product release (and not necessarily all good)
Amount of time wasted trying to download new software application
Number of hits ending in "can't open page" errors
Number of users frustrated (and angry) by a software download

I would have posted the list and even added to it, but catastrophe struck. In the strangest of coincidences, my hard drive fatally crashed during the Firefox 3 download. Mmmm, maybe Internet Explorer 8 is my destiny, and I must accept it.

So, I didn't share the revelry or frustration of Download Day. But I will chide Mozilla for a botched Firefox 3 kick-off and say it's time to ask a different question—not how many downloads there were but how many there weren't because of early server problems.

As for my hard drive catastrophe, I blogged about it in two parts—one and two—over at Apple Watch. If you enjoy watching car wrecks, the posts should be morbidly sufficient reading.

Microsoft to Open European Search Tech Center

2008-06-18T10:55:00.000+05:30

Microsoft continues its Google and Yahoo competition with plans to open a search technology center in Europe.

NEW YORK (Reuters)—Microsoft Corp said on Tuesday it planned to open a search technology center (STC) in Europe as part of its plan to accelerate investments in Live Search.

The location of the STC has not yet been determined, the company said, with several cities being considered.

The STC will be opened in Microsoft's 2009 fiscal year, starting July 1 this year.

Microsoft has sought to increase its presence in online search in a bid to gain ground on market leader Google Inc and Yahoo Inc to create an online advertising powerhouse.

That effort to gain market share in Web search led to its unsuccessful offer to buy Yahoo for $47.5 billion earlier this year. Yahoo said on Thursday that talks with Microsoft over a smaller deal for its Web search business failed to produce a deal.

Last month, Microsoft launched a "cashback" search service that pays users a rebate for buying products they found using the company's Windows Live search engine.

Microsoft Adds Injury to Insult

2008-06-17T11:55:00.000+05:30

The strangest chapter in the Microhoo drama is Microsoft's ridiculously low offer for Yahoo's search business.

I'm catching up on news that broke on Friday, when I chaperoned 11 teens at Six Flags Magic Mountain. Apparently, Kevin Johnson, president of Microsoft's Platforms & Services Division, sent an e-mail to his employees about Yahoo. He revealed how pathetically little Microsoft offered Yahoo for its core search business: $1 billion.

Quick background: On May 18, Microsoft issued a press statement about offering Yahoo a new deal, which turned out to be buying only the search business. On Thursday afternoon, Yahoo released a statement stating that there would be no deal of any kind with Microsoft.

Following that press release, Yahoo announced that it had cut a search and advertising deal with Google. Kevin's memo offers some closure, another dig at Yahoo's board, more fodder for Carl Icahn's proxy fight and a dose of FUD (fear, uncertainty and doubt) for Yahoo shareholders.

Based on Kevin's e-mail, which the stalwart Todd Bishop obtained (hey, I was out of the office), Microsoft offered Yahoo $1 billion for its core search business and another $8 billion investment at $35 a share. The offer is downright unbelievable. For months Microsoft had on the table a $31-a-share offer, valued at $44.6 billion, with executives claiming that search was the main reason for buying Yahoo. So, how does a puny $1 billion offer reconcile with search being the most important part of an earlier $44.6 billion offer for all of Yahoo?

As I explained in May, selling search would be akin to lobotomizing Yahoo, and that was without information about the lowball offer.

At the least, Microsoft's offer was self-serving, with the company gaining the overwhelming benefits from the Yahoo deal on the cheap. That said, the $8 billion investment would have made Microsoft a major Yahoo shareholder with vested interest in its success. Apparently, Microsoft was ready to offer Yahoo good deals on search services, whatever that means, as part of the agreement.

If the offer for Yahoo's search business was sincere, which I doubt, then Microsoft execs sorely misread Yahoo. If Yahoo's board really wanted more money for shareholders, it would have accepted Microsoft's earlier, slightly raised offer.

Business is as much about power as performance. Lawyers are careful about on whose turf certain meetings take place because of the balance of power and which side might gain seeming advantage over the other. Corporate dealings aren't much different. One billion dollars for Yahoo's crown jewel--search--is insulting. It's a slap in the face.

My speculation: Jilted Microsoft tried to take a power position over Yahoo by retracting the merger offer and then offering so much less for something still quite valuable. Maybe Microsoft CEO Steve Ballmer and Kevin Johnson really thought that Yahoo was weak enough to cave.

Wrong. Now matters are worse, with Yahoo sleeping with Google. Microsoft was wrong to start this whole Yahoo merger thing. But to have driven Yahoo to Google is perhaps the greater corporate blunder.

Microsoft: Ask us for driving directions

2008-06-16T21:02:00.000+05:30

Microsoft wants to take Windows in a new direction.

The software maker announced on Monday its plans for NavReady 2009, a customized version of Windows Embedded that's specifically designed to power in-car navigation systems. The software is based on Windows CE, the slimmed-down version of Windows that is used for Windows Mobile.

Some GPS makers, such as Mio, already use Windows CE, though Microsoft says it is adding support for several new features with this navigation-specific release. New features include support for Live Search, Bluetooth, and MSN Direct, which allows real-time traffic and gas prices. NavReady 2009 should start showing up in devices starting this holiday season, Microsoft said.

This is not the first time Microsoft has tried to tailor its general-purpose Windows Embedded operating system to the needs of a particular market. Most recently, it created a version for cash registers. But even Windows Mobile itself was an attempt to tailor the generic operating system for a specific market.

The next version of the point-of-sale software, dubbed POSReady, is due out some time next year, Microsoft said Monday.

Apple-Microsoft: Friendly Exchange

2008-06-15T10:58:00.000+05:30

For years, Microsoft has been the largest Mac developer outside of Apple. It's return favor time.

Apple and Microsoft may be the definition of "coopetition." The companies may compete, but they're surprising partners, too. Even as Apple's "Get a Mac" ads throttle Windows Vista or as iPhone 3G whacks at Windows Mobile, Microsoft's competitor has become a surprising partner for Exchange Server 2007. Exchange is suddenly very important to Apple.

In March, Apple announced that iPhone 2.0 software would support Microsoft's ActiveSync, offering full synchronization fidelity with Exchange Server. The update is coming soon, presumably July 11 with the release of iPhone 3G.

Yesterday, Apple CEO Steve Jobs started his World Wide Developer Conference keynote by talking about Exchange Server support: "We've built it in, out of the box in iPhone 2.0 software." There is support for push calendars, contacts and e-mail, auto-discovery, global address lookup, and remote wipe (if the device is lost or stolen).

He touted industry interest: 35 percent of Fortune 500 companies participated in Apple's Exchange beta program, including the top five commercial banks and security firms and six of the seven top airlines. Steve then showed a video with enterprise technology managers touting iPhone's Exchange support.

Later in the keynote, Apple's Phil Schiller introduced the new service MobileMe, which he described as "Exchange for the rest of us." That line also appears in online MobileMe marketing materials. How many people outside of the technology business really know what Exchange is? Certainly it's a smaller portion of the population, yet Apple uses Exchange as part of its MobileMe promotionals. Apple's marketing is always deliberate, using words that convey broader connotations or meanings. Apple must believe that Exchange is well-known enough and sufficiently embodies what it wants to convey about MobileMe.

Something else: Yesterday, quite quietly, Apple also started talking about the next version of Mac OS X, Snow Leopard. According to the Snow Leopard informational page posted yesterday:

"Snow Leopard includes out-of-the-box support for Microsoft Exchange 2007 built into Mail, Address Book, and iCal. Mac OS X uses the Exchange Web Services protocol to provide access to Exchange Server 2007. Because Exchange is supported on your Mac and iPhone, you'll be able to use them anywhere with full access to your email, contacts, and calendar."

There is limited Exchange support in Mac OS X 10.5, or Leopard, but its successor apparently will go much further. Fuller Exchange support makes sense, given that Apple licensed ActiveSync from Microsoft and iPhone 2.0 supports the server software.

Apple isn't doing Microsoft any favors, though, same with Microsoft and Mac development. Microsoft develops products like Mac Office because they sell well; the company makes money. Apple is finally starting to take the enterprise market more seriously. Any enterprise move would necessitate supporting Exchange, and Apple has more to offer businesses with iPhone and Mac OS X.

Apple is Exchange Server's newest developer buddy. But don't get too cozy, guys. The friendship is really about buddying up to Exchange's enterprise friends, to whom Apple would like to sell iPhone and Macs.

Adobe's Acrobat Act Adds Flash

2008-06-04T20:17:00.000+05:30

The real format war isn't between OOXML and ODF, it's OOXML vs. PDF. Today, Adobe launched a devastating attack against Microsoft.

As long had been anticipated, Adobe has added Flash to PDF creation—and much more. The move extends PDF beyond its paper origins firmly into the digital realm. Microsoft lags far behind. Today Adobe announced Acrobat 9 and Adobe Reader 9, with support for PDF with Flash.

For years, I've contended that Microsoft's real file format competitor was PDF and not Open Document Format. PDF is a productivity format, too, but one often ignored when analysts evaluate Microsoft file format competitors. There's misguided perception that businesses largely need just one file format. For productivity documents, PDF also is widely used, just often ignored in analysis of the competitive desktop. In fact, I assume that PDF penetration, among businesses and consumers, is at least as great as Microsoft binary file formats and a whole lot more than Office Open XML.

There are reasons why Microsoft has so recently launched so many healthcare initiatives, for example. It's not for love of doctors. Healthcare is an enormous Adobe stronghold, bolstered in part by government regulations. For example, pharmaceuticals submit drug trial information to the U.S. Food and Drug Administration digitally, in PDF format. Elsewhere, PDF/A, the archival version of the format, is endorsed by U.S. National Archives.

Acrobat 9 takes PDF someplace Microsoft simply isn't ready to compete. Flash also is everywhere and now it's ready to spice up digital documents, to truly transcend any paper origins. Microsoft has XPS (XML Paper Specification) and Silverlight, but the two lack the market penetration or creation tools of Acrobat, AIR, Flash and Flex.

Adobe's Acrobat 9 approach highlights the flaws in Microsoft's desktop, digital content creation strategy. Adobe has done much better building tools supporting its principal file format. Microsoft has too many tools producing content for too many silos, such as animation and Web site creation. Adobe tools embrace similar developer and content creation domains, but with pull back to its principal file format.

Adobe and Microsoft both share fault. Adobe took too long incorporating Flash into PDF. Competitively and customer constructively, Adobe should have reached this pinnacle one product version ago. Microsoft should have known that Adobe would incorporate Flash into Acrobat, supported by PDF. Adobe has set up Flash to invade the desktop even more strongly, right smack where the injury will competitively be greatest for Microsoft. Meanwhile, Silverlight chases Flash on the Web.

Microsoft's near obsession with attaining ISO standardization for OOML may be part of the problem. The priority should have been extending the utility of Microsoft desktop formats in areas where Adobe was sure to go and which made more sense for customers—incorporation of animation and collaboration elements into Office file formats. There, Microsoft relied too much on PowerPoint and SharePoint, methinks. Adobe has got a more elegant solution that doesn't require the purchase of new server software, although it's an option.

Acrobat 9 also extends earlier collaboration features and, more importantly, support for disparate file types. Since version 7, Acrobat has allowed end users to put together documents from almost any source and save them as a single, PDF file. So a PDF file could include a CAD drawing, Excel spreadsheet, Web page and Word document that anyone could collaborate on using Adobe Reader. Acrobat 9 motif "PDF Portfolios" extends the multi-document, multi-format support concept.

Microsoft executives harp on about the company's software-plus-services strategy, but too often the approach is server software plus services. Many new desktop features require purchase of additional server software. While Adobe also pushes server software, Acrobat provides collaboration and other non-traditional document creation features as part of Acrobat. Today, Adobe also launched Acrobat.com in beta, providing facility for more easily sharing and collaborating on PDF files. I'll more fully comment on the new service in a subsequent post.

Today's Adobe announcements further advance the company's near-certain enterprise collision with Microsoft. I give this round to Adobe, which has provided facility for creating more modern, digital documents. Surely, the transition was difficult for Adobe, which built its Acrobat and PDF businesses around mimicking paper documents. Surely there were cultural and management obstacles to change.

Competitively, Microsoft simply has nothing comparable to offer, unless SharePoint and supporting server software are considered. But SharePoint and supporting Microsoft software make for a hefty infrastructure upgrades. And Adobe's tools are better honed for truly digital document creation.

Microsoft should never have let Adobe move so swiftly and so far into Office territory. Microsoft Chairman Bill Gates long ago identified the importance of controlling file formats. Perhaps Adobe is learning too well from Microsoft and accordingly applying the lessons.

'You at Microsoft' Campaign Folly?

2008-06-03T18:07:00.000+05:30

While no conspiracy theorist, I simply don't believe in coincidence. Did Mini-Microsoft trump Microsoft PR?

Strange happenings: Yesterday, insider Mini-Microsoft posted about problems with the company's India operations. He culled the post from months of comments. It's fascinating reading. This morning, Microsoft dropped a press release about "The Changing Face of IT—A Web Conference" a mere three hours before it starts. Three hours?

For a company that announces so many events so far in advance, why would Microsoft give such short notice for a Web conference on diversity in IT? I can think of some reasons:

Oversight; somebody forgot
Attitude; management doesn't care
Damage control; response to Mini and others
Proactive blogging: Mini knew about the diversity program

My guess: Either of the last reasons, or a combination of both. If so, there is some real irony here. Microsoft makes so many announcements through employee blogs rather than issuing press releases. Here, the company could be responding to an employee blog with a last-minute press release. Or, the blogger took the offensive by posting something potentially negative before a major announcement—and it's much bigger than a mere canned Webcast.

Microsoft also dropped a diversity press release and two others about its work in China. Related: There is a new diversity Web site: The Changing Face of Microsoft. All this work was clearly planned ahead of Mini's blog post. The new Web site is simply too sophisticated and contains too many testimonies to have been created overnight. Besides, according to Whois records, Microsoft registered the youatmicrosoft.com domain on March 13.

The real question: Who responded to whom? Did Mini know about the diversity announcements and decide to post about the alleged problems with Microsoft India? Or did Microsoft execs see the Mini blog and decide to launch the new diversity Web site early, which would explain the short notice about the Webcast?

The answer is one reason for this post: the power of employee blogging and its potential impact on a company's initiatives. Diversity is a hot-button topic for any kind of controversy.

Still, I must ask: Could it be coincidence that Mini posted less than a day before Microsoft's big diversity splash? You tell me. Comments are open for your responses.

Bill Gates' 80-20 Rule

2008-06-01T08:50:00.001+05:30

How much time will Chairman Bill Gates spend at Microsoft after he retires?

I got that answer during the cocktail reception before the D Conference officially opened last night in Carlsbad, Calif.

I was surprised to see Bill at the reception; after all, in just about 45 minutes he would take the stage with Microsoft CEO Steve Ballmer and D6 organizers Kara Swisher and Walt Mossberg. He was surprisingly relaxed, or maybe not so surprisingly. For someone so often in the spotlight, maybe Bill can just be himself anywhere.

As I approached, he was speaking about the Bill and Melinda Gates Foundation and projects where Microsoft software might be involved. "I use my own money," Bill said, rather than the Foundation's. I was impressed by that statement.

It's inevitable, given the popularity of Microsoft software, that the charitable organization would have projects where the company's products would be involved. That's a sticky area, rife with potential conflict of interest. Bill made clear that the simplest solution was to pay himself. It's a fine distinction, given that a large portion of the Foundation's endowment comes from the Gates, but an important one nevertheless. The approach sets a high standard for the use of public money.

Bill Gates catches an early cocktail minutes before a small mob of reporters encircles him and asks questions about leaving Microsoft.

Bill next answered somebody's question about his impending departure from day-to-day Microsoft operations. He is set to retire on June 30. But given that he is still chairman of the board and the largest shareholder, Bill will remain involved in Microsoft.

Right now Bill spends about 80 percent of his time at Microsoft and another 20 percent at the Foundation. From July 1, that 80-20 will flip around, with more of his time dedicated to the charitable endowment.

"My main office will be either at the Foundation or at Microsoft," Bill said.

As I stood listening to Bill, TechCrunch co-editor Michael Arrington joined the listening circle. I had seen Michael lurking about the lobby area earlier. I've never met him, and this was the first time I had ever seen him. He circled around Gates, with fiercely piercing eyes but the look of someone uncomfortable with the venue. There was a shark-like concentration as he flowed among the cocktail crowd.

While we listened to Bill, Michael pulled out an iPhone, which he quietly used to snap some pics. Here's the image he posted. That's me wearing a camera and gawking at Bill. By coincidence, I snapped a pic of Bill, while Michael stood by sending images (presumably by e-mail) using his iPhone.

TechCrunch's Michael Arrington (in background) sends picture of Bill Gates on an iPhone.

Michael wasn't the only reporter blogging or photo blogging D6 live. I saw many others, including CNET News.com's Ina Fried, who tapped, tapped on a Palm Treo.

I was surprised to find myself intimidated by the number of high-profile technology CEOs milling about. Besides Microsoft's chairman, I saw CEOs: Amazon's Jeff Bezos, who is skinnier and shorter than I expected; Revolution's Steve Case; Michael Dell; SmugMug's Don MacAskill; and Sony's Michael Stringer. Those are simply the people that I recognized. Oh, yeah, and I saw Steven Sinofsky, Microsoft's senior veep for the Windows and Windows Live Engineering group, lurking about, too.

The D Conference is held annually at the Four Seasons resort in Carlsbad, Calif. I drove about 35 miles from San Diego to attend the opening gala. Paying attendees got a bag full of swag and Guitar Hero III for the Wii. I laughed at arriving guests carrying the oversize Guitar Hero boxes under their arms. My interest in going for the one day: Bill and Steve chatting with Kara and Walt and the Windows 7 demo.

Windows 7 debuts at D6

2008-05-31T10:07:00.001+05:30

News Analysis. Tonight, Microsoft put to use the silence before the great iPhone storm. Windows 7 came out to play.

There had been rumors, which proved right, that Microsoft would show off Windows Vista's successor at the D Conference in Carlsbad, Calif. I'm here at the opening night event, which is still underway as I post. This year's conference, the sixth, is simply called D6.

Julie Larson-Green, Microsoft's corporate veep for Windows Experience Program Management, briefly demoed Windows 7, which gave some sense of the revamped user interface. Microsoft is bringing to the masses the multitouch capabilities found in Surface Computing tabletops. Surface is based on Windows Vista.

Microsoft CEO Steve Ballmer described the demo as the "smallest snippet of Windows 7." Small snippet maybe, but it's big capability.

Julie demonstrated the multitouch capabilities on a Dell Latitude XT, same model that is shipping today. Looking ahead to the evolution of operating system UI, "I think it's super important," she said about multitouch.

Julie is a rising Microsoft star; she oversaw development of the Office 2007 UI.

"You will be able to do these things in Windows 7," Julie said about the capabilities she showed off, starting with drawing with fingers in Windows Paint. Multitouch will be on "all sizes and shapes of computers," she said. But, like the Latitude XT, they would need a digitizer supporting multitouch.

Multitouch is "not complete replacement of the mouse," Julie conceded. The capability will be pervasive in Windows 7. She said that people would be able to manipulate Windows with touch and gestures instead of the mouse.

Human beings are tool users. Fingers and touch is a more natural UI than the mouse and keyboard. But Microsoft isn't alone pushing multitouch. Apple is there, too, with iPhone.

Why Here?
The conference is a surprisingly appropriate venue for debuting Windows 7. D6 organizers Kara Swisher and Walt Mossberg are well-connected technology journalists. Their conference typically brings in the highest echelons and biggest influencers of the technology industry. Mergers and other deals are common D Conference occurrences. There is also big noise, whether from the All Things Digital Web site, bloggers or more traditional news coverage. It's a big venue, even for a little Windows 7 demo.

Timing is good, too. Apple CEO Steve Jobs isn't attending this year's D Conference, presumably in preparation for the company's developer conference starting on June 9. Meanwhile, the biggest technology event of the summer, iPhone 2.0, is at least two weeks away from debut. Microsoft is capitalizing on the Apple lull to make some Windows noise.

Microsoft really needs a cacophony. Vista is the much-maligned Windows black sheep. There's lots of noise against Windows and not much for it. The Windows 7 debut allows Microsoft to take some control over the messaging, by disclosing just a little bit about Seven. Bit-by-bit could work for Microsoft, as long as there is an ongoing trickle of information—and leaks—to wet the Windows community's lips without satisfying the thirst.

Apple's D6 absence took on sudden presence during Julie's presentation. Multitouch already is available on iPhone. Microsoft would have had a more difficult time making this presentation with Apple at D6. There's Mac likeness elsewhere, with a Mac OS X-like Dock replacing the traditional Windows tool bar.

User interface is usually the last element that Microsoft reveals about a new operating system. Microsoft did discuss some Longhorn (aka Vista) UI elements in October 2003. But major changes were kept secret until the late stages of operating system development. By revealing too much too soon, Microsoft creates opportunity for Apple or Linux developers to incorporate trend-setting UI into their operating systems. Apple already is pushing multitouch and could easily make multitouch a major feature of the next version of Mac OS X, which is likely to come before Windows 7 ships.

Clearly, Microsoft is trying to take control of the messaging. Earlier today, CNET News.com posted a Q&A with Steven Sinofsky, senior veep over the Windows and Windows Live Engineering group. Nine minutes after the Q&A went up, supporting "Communicating Windows 7" posted on Microsoft's Windows Vista blog. Steven's interview, the blog post and tonight's Seven demonstration were clearly coordinated.

Why Now?
The question to ask: Why now? Microsoft's developer conference is still about six months away. Windows Vista has only been in the mainstream marketplace for about 18 months. So, Microsoft is coming out unusually early talking about Vista's successor this publicly. Conclusions I draw:

Windows 7 will ship in 2009, almost certainly in time for holiday PCs. Microsoft disclosed today that there would be no major architectural changes from Vista, which would greatly reduce development complications.
Microsoft isn't worried about Windows 7 disclosure hurting Vista sales. That's a sobering consideration. Either Microsoft has finally disowned Vista or executives recognize that market reception is so bad nothing could make sales worse. Or, executives are living in 150-million-licenses-shipped glow, believing that Vista is doing well despite the large number of licenses downgraded to Windows XP.
Steven and Julie are part of the new Windows management team that needs to demonstrate how much it's in control of Seven development. Pretty much every executive associated with Vista has left Microsoft or been sidelined. Past Windows launches were meal tickets to big promotions. Vista association is a Microsoft career buster. New management must create confidence that Microsoft has learned lessons and Seven development won't track like Vista.
Whatever value Seven gives will come outside the core architecture—from the new UI and services that Microsoft will either closely align with or integrate into the operating system.

Based on tonight's demonstration, I'm convinced that Microsoft plans on releasing beta code during its October developer conference. The timing is consistent with planned timing for Internet Explorer 8 public beta. Windows 7 beta would be for developers, however, and not for widespread testing.

Video: Multi-Touch in Windows 7

I don't believe that Vista is the best foundation for Seven. That said, multitouch is a natural evolution of the operating system UI. It's good to see Microsoft going in that direction. But will Apple get there first? Maybe.

The important question: Will Vista's successor be Lucky Seven? It's too early to say. But multitouch UI is really encouraging.

Vista: 150 Million Shipped

2008-05-30T21:08:00.000+05:30

News Brief. A month after the last numbers update, Microsoft ships 10 million more Windows Vista licenses.

Microsoft revealed that 140 million licenses shipped during its fiscal 2008 third-quarter earnings announcement in late April. This evening, during the D Conference in Carlsbad, Calif., Microsoft CEO Steve Ballmer revealed the 150 million figure. I'm here at the opening night event, which is still underway as I post. This year's conference, the sixth, is simply called D6.

Steve discussed the figure during some pressing questions about Windows Vista. D Conference co-organizer Walt Mossberg asked if the operating system was a failure, or even a mistake.

"Vista's not a failure and it's not a mistake," Steve said. He said that half of enterprises buying PCs get them with Vista, even if they later downgrade. He noted that they could choose Windows XP from the start.

Walt turned the questioning to Microsoft Chairman Bill Gates, asking if he was disappointed by Windows Vista.

Bill said that no Microsoft operating system, not even Windows 95, was "100 percent of what I wanted."

He continued: "We have a culture where we need to do better." Bill then joked that Vista has given Microsoft lots of opportunity to practice the philosophy.

"There are plenty of lessons out of Vista," Bill later conceded.

Steve acknowledged that Microsoft had made some sacrifices for the benefit of security. Yes, Microsoft might do some things differently in hindsight. Because of some decisions made by Microsoft, Vista was "jarring to the ecosystem," he conceded. To Microsoft's surprise, research showed that the most jarring aspect was changes made to the Windows user interface.

The Steve and Bill Show

2008-05-29T16:06:00.000+05:30

News Commentary. Today, the Abbot and Costello of computing gave their farewell performance.

Microsoft's chairman, Bill Gates, and CEO, Steve Ballmer, kicked off this year's D Conference in Carlsbad, Calif. This year's event, the sixth, is simply called D6. Bill and Steve reminisced about the past, at a highly appropriate venue, as Microsoft's chairman prepares for his June 30 day-to-day retirement.

I refer to Gates and Ballmer as Abbot and Costello not with sarcasm, nor as insult. Over the years, the two men starred in many self-deprecating video spoofs that made fun of themselves and their company.

The evening opened with an editor's cut of the Bill Gates last day video show at the Consumer Electronics Show in January. (As I post, the two men are still on stage talking.)

I found a few other videos—and far from the best:

Da Da Da (Quality isn't great)
The Matrix (Comdex attendee incomplete recording)
Xbox 360
Gates vs. Ballmer

This wasn't the first, or even the last, time that Bill sat talking with technology columnist Walt Mossberg and Steve at the D Conference. But last year's Steve was somebody else: Apple CEO Steve Jobs, who isn't attending D6 (presumably because of preparations for his company's developer conference on June 9). Last year's Bill and Steve show brought together mythical opponents, founders of two distinct computing camps—Windows and Mac. This year's Bill and Steve show was more buddy adventure. Perhaps Buzz Lightyear and Woody would be better buddy metaphors.

Bill and Steve were card-playing buddies at Harvard, where Microsoft's co-founder was a notorious poker player. The friendship brought them both to Microsoft, where Steve took over as CEO in 2000. I've heard lots of criticisms about Steve's leadership over the years, mainly because of Microsoft's stock performance. Clearly, he still has his buddy's confidence—and with justification. Windows Vista may have crashed (and probably will burn), but Microsoft has gotten bigger and fatter during Steve's tenure.

Bill is following the tradition of all great monopolists: philanthropy. History will remember Microsoft's co-founder more for what he does as a philanthropist than as a businessman. In some respects, he will remain a monopolist. The Bill and Melinda Gates Foundation's enormous endowment makes the organization into a quasi-charity monopoly. Giving carries great influence, and the Foundation has deep pockets for which to influence the direction of aid or research.

But back to the buddies. They were kind of college roommates, Steve said. "Bill was a pretty shy guy, I would say," Steve explained. But the future Microsoft co-founder had a "certain kind of spark, particularly late in the day."

Later Steve said, "We were close friends, pretty much from the start."

Bill left Harvard to start Microsoft. Steve graduated, worked for Proctor and Gamble and then went on to business school at Stanford. While there, after Microsoft moved to Seattle, Steve got a passive kind of request from Bill, who called and said that it was too bad he didn't have a twin brother. "That was that sales call," Steve exclaimed. Next day, Steve called Bill, "What about me? I don't have a twin brother!"

They described the early days at Microsoft, where part of the emphasis was keeping enough cash on hand that the company would survive even if no customer paid. Microsoft continues the same philosophy.

Walt asked about the perception that Bill is the technology guy and Steve is the salesman.

"I ran the Windows 1.0 development team," Steve responded. "I am not an engineer." Steve made clear that he's no technologist.

D Conference co-organizer Kara Swisher asked Bill if he was a business man, to which he quipped, "Sales minus cost equals profit." Pause and he then joked, "Is there more?"

Walt asked about the transition eight years ago and whether or not Bill had veto power. "I am the junior partner," Bill responded. "I have been for the last eight years."

There was a year transition as roles changed. "It was a little confusing." Bill said about the transition. Steve interrupted, "It was difficult."

Steve still consults Bill on important decisions, but as a "friend" rather than as Microsoft chairman.

The two men have worked together for 28 years.

Are These Windows Transparent or Translucent?

2008-05-28T17:09:00.000+05:30

News Analysis. Could Microsoft possibly say less about Vista successor Windows 7?

Steven Sinofsky's motto should be, in the spirit of Memorial Day: "Loose lips sink ships." Office development proceeded with scant disclosure under his tenure. Little has changed since he assumed the role as Microsoft's senior veep for the Windows and Windows Live Engineering group. Open disclosure and dialog punctuated past Windows development—not that the process did much for Vista.

Now Steven is talking Windows 7 to CNET News.com. But he's not saying much. There's even a Microsoft "Communicating Windows 7" blog post, credited to Chris Flores, defending the say-no-more interview.

Microsoft seemingly has plenty of reasons to keep mum about Seven, starting with freezing Vista sales. The company claims 140 million Vista licenses shipped. But that number is deceptive. Based on interviews with analysts and enterprise IT managers, the majority of licenses are on new PCs where Vista is never deployed. Most businesses are stripping off Vista and using downgrade rights to install Windows XP.

By that measure, Vista is a disaster. It's the Titanic hitting the only iceberg within 1,000 kilometers and sinking in five minutes. Windows customers waited three to nearly six years for Vista (depending on when they deployed XP). There should have been a wild rush for Vista. But the Vista, ah, view, was more stinking landfill than garden. People are selling their Vista homes and moving back to the XP neighborhood. Yeah, yeah, I mixed metaphors.

With real world Vista deployments so bad, Microsoft shouldn't want to make adoption matters worse. Big talk about Seven could easily solidify IT organizational determination to skip Vista and wait for Seven. Microsoft knows there really shouldn't be any talk about Vista's successor. Yet Steven gave that interview where he didn't say much.

But he talked lots, which is the point. That he said so little may be more about his personality and the interview style of reporter Ina Fried. CBS just bought CNET. Windows 7 maybe isn't the stuff of "60 Minutes," but surely somebody at the network knows something about interviewing tight-lipped personalities.

Perhaps Steven needed a platform for explaining why there is so little information disclosure about Windows 7—why things have changed.

Chris offered some explanation about why things have changed in his credited blog post:

"Typically when Microsoft ships a new OS (like Windows Vista), we immediately start talking about the next version...What is a little different today is when and how we are talking about the next version of Windows. So, why the change in approach? We know that when we talk about our plans for the next release of Windows, people take action. As a result, we can significantly impact our partners and our customers if we broadly share information that later changes. With Windows 7, we're trying to more carefully plan how we share information with our customers and partners."

What Chris really means—and what Steven essentially says in his CNET News.com Q&A—Microsoft wants to take greater control regarding the information disclosed about Windows development. Microsoft will say what it wants when ready. Not any sooner. So why are Steven and Chris revealing tidbits today? I see two reasons: Myth busting and getting out some positive information about Windows (e.g., not talking about Vista).

Because Microsoft has been so mum about Windows 7, rumor mongers have set the agenda. Meanwhile, Vista has caught a kind of virtual leprosy; the operating system is shunned, and it's the object of ridicule. Microsoft simply can't let either circumstance continue. So today the company started a coordinated effort to take control of the messaging.

The big myth-busting information is a real shocker: Windows 7 plumbing won't be all that different from Vista. Chris' credited blog post explains:

"The long-term architectural investments we introduced in Windows Vista and then refined for Windows Vista SP1 and Windows Server 2008 will carry forward in Windows 7. Windows Vista established a very solid foundation, particularly on subsystems such as graphics, audio, and storage. Windows Server 2008 was built on that foundation and Windows 7 will be as well. Contrary to some speculation, Microsoft is not creating a new kernel for Windows 7."

Well, son of a bitch. There's no new kernel? Seven builds on Vista's "solid foundation?" Same `ol, same `ol isn't what Microsoft customers and partners need from Seven. They need different—and, please—not a pretty new user interface. The approach is great for backward compatibility, particularly hardware drivers, but not much for advancing Windows where it needs to go.

Something else holding Seven back. From Chris' credited blog: "One of our design goals for Windows 7 is that it will run on the recommended hardware we specified for Windows Vista."

In March, I strongly advocated that Microsoft start afresh with a new kernel and build up a modular operating system that could run on many devices. Clearly, Microsoft is taking no risks, which is the riskiest approach possible. Same kernel, same hardware requirements won't get Windows onto the plethora of devices it needs to be. Vista requirements are too high and best suited for PCs.

Besides myth busting, there is Microsoft's desperate need to get out something positive about Windows. That's not easy with all the negative Web chatter about Vista and the constant nitpicking of Apple "Get a Mac" TV commercials. Silence is golden only when there is no other noise. Given how bad the Vista talk is, perhaps Microsoft executives think that they can get away with talking Seven without causing too much sales harm to the current operating system.

That said, including today's reaffirmation of a ship date—"approximately three years after the general availability of Windows Vista," according to Chris' credited blog—any information risks freezing sales. I see extremes rather than middle ground. Either Microsoft executives see that even limited information disclosure can do little more harm, or they don't care—meaning they've already given up on Windows Vista.

If the latter explanation, isn't that delusional thinking, assuming Seven plumbing will be no better than Vista's?

Microsoft ends last chapter of book scanning

2008-05-27T17:46:00.000+05:30

SEATTLE - Microsoft Corp. is abandoning its effort to scan whole libraries and make their contents searchable, a sign it may be getting choosier about the fights it will pick with Google Inc.

(Msnbc.com is a Microsoft-NBC Universal joint venture.)

The world's largest software maker is under pressure to show it has a coherent strategy for turning around its unprofitable online business after its bid for Yahoo Inc., last valued at $47.5 billion, collapsed this month.

Digitizing books and archiving academic journals no longer fits with the company's plan for its search operation, wrote Satya Nadella, senior vice president of Microsoft's search and advertising group, in a blog post Friday.

Microsoft will take down two separate sites for searching the contents of books and academic journals next week, and Live Search will direct Web surfers looking for books to non-Microsoft sites, the company said.

Nadella said Microsoft will focus on "verticals with high commercial intent."

"We believe the next generation of search is about the development of an underlying, sustainable business model for the search engine, consumer and content partner," Nadella wrote.

At an advertising confab at Microsoft's Redmond, Wash., headquarters this week, he demonstrated a new system that rewards customers with cash rebates for using Live Search to find and buy items on advertisers' sites.

Search engine stuck in third place
Microsoft entered the book-scanning business in 2005 by contributing material to the Open Content Alliance, an industry group conceived by the Internet Archive and Yahoo. In 2006, it unveiled its competing MSN book search site.

Unlike Google, whose decision to scan books still protected under copyright law has provoked multiple lawsuits, Microsoft stuck to scanning books with the permission of publishers or that were firmly in the public domain.

The company said it will give publishers digital copies of the 750,000 books and 80 million journal articles it has amassed.

Microsoft's search engine is a distant third behind Google's and Yahoo's, in terms of the number of queries performed each month, despite the company's many attempts to emulate Google's innovative search features and create some of its own.

Microsoft as much as said its search strategy wasn't working when it offered in February to buy Yahoo to boost its search and advertising. Talks between the companies collapsed because Yahoo executives sought more money.

Google Still Beats Microsoft, Yahoo And Ask.com For Search Queries In USA!

2008-05-26T17:36:00.000+05:30

Hotwise an online competitive intelligence service announced in its report that Google search attained a new high while Microsoft and Yahoo! Search attained new lows.

According to March 2008 statistics for the search engine in USA, Google received 67.25% of the entire US search. While Yahoo search received 20.29%, MSN search received 5.25% and ASK.com search received 4.09%.

Let us take a view at some of the interesting stats:

So what have US people been searching for?

The search includes various categories like Entertainment, Sports, Health and Medical which top the charts and many more.

Here are the stats for various categories that have been searched by US people:

I wonder is the war between MICRO-HOO! Affecting the search users or it is the better indexing with better search results which is driving more and more people to opt for Google as their favorite search engine.

Five Google-Whacking Ideas for Microsoft

2008-05-25T17:13:00.000+05:30

Seeing as how it's a holiday weekend here in the United States—and so a somewhat slow news day—I am making some Google-killing suggestions for Microsoft's consideration. Surely, I can do no worse suggesting lame ideas for beating Google than Microsoft already has. So, without fanfare, I humbly offer five wacko ways Microsoft could increase search share against Google. The list is in no order of importance.

1. Pay customers to use Live Search. No. No. Not that cashback gimmick but real money for search. Microsoft could offer a nickel a query. According to ComScore, MSN/Live had 961 million search queries in April, down from 1 billion in March. Let's say the nickel-a-query scheme boosted MSN/Live search queries to 3 billion a month, that would be $150 million, perhaps $160 million when factoring in administrative costs.

Using Microsoft's original $44.6 billion offer for Yahoo as base, Microsoft could pay out $160 million a month for about 23 years before reaching the price it was willing to pay for Yahoo. Conceptually, Microsoft would catch Google long before then. Surely for as little as $5 billion cash, Microsoft could buy enough search queries to close the gap on Google within 18 months, perhaps sooner for a dime a query.

2. Google up celebrities and politicians with evil. U.S. Secretary of State Condoleezza Rice just made the great Google pilgrimage. Google is the place to go to be cool by association. But how would Condoleezza feel if Google searches for her name brought up insulting keywords (I'll suggest none for gender and race reasons)? Surely Microsoft could manipulate the Google search results (it has been done before) and buy up obnoxious keywords.

Insulted politicians might be just a wee bit unfriendly to Google because of the search results. Meanwhile, Microsoft could stack up keyword niceties over at Live Search.

A reverse strategy could work for popular search terms like "Paris Hilton," making it so a Google contextual search would bring up links to videos of churchgoers. People looking for celebrity sex tapes surely wouldn't want to watch a church choir singing about the blood of Jesus.

3. Hire Carl Icahn to launch a proxy fight. The billionaire businessman has made a profession out of wedging shareholders against boards of directors. He's going after Yahoo, why not Google? Carl could argue that current management has driven Google into the ground. On Dec.26, Google shares traded for more than $710 a share. At time of writing this paragraph, Google shares traded for a measly $540.93, down $8.53. OMG! Only $540 a share? Carl could flame about billions in lost shareholder value.

The billionaire business-buster could seek a place on Google's board along with a couple of Microsoft insider cronies. They could influence strategy and gain access to corporate trade secrets. Yes, there are risks, like the possible violation of a couple dozen SEC rules. Details. Details. Desperate times call for desperate measures. No politician and judge whose name search on Google brings back the keyword "scumbag" is going to put Microsoft CEO Steve Ballmer in prison because of a few puny SEC violations.

4. Hijack Google.com domain. This one would have to be a failsafe strategy—if all else fails. The Google.com domain expires in September 2011. Microsoft would need to bribe Google's administrator responsible for the domain to set the WHOIS information as private and then neglect to renew Google.com. Microsoft could use a service like SnapNames to procure Google.com and redirect traffic to Live.com.

Again, there are risks, and the plan would be tough to execute. But Microsoft would instantly jump to being No. 1 in search. It's a longer-term scheme but one with a big payoff.

5. Go back to the past and fix the problem. Microsoft Research should build something more useful than WorldWide Telescope. How about making a telescope that peers into the past? Better: A time machine. Then Robert Scoble would have something to really cry about. Send a Terminator chick into the past and have her become girlfriend to either, or both, Google co-founders. She could give them something more important to think about than math, and Google would never be.

Yes, there could be problems with time paradoxes and alternate universes. But surely googling Google into nothingness would be worth the risk.

Now my question to readers: What would you suggest Microsoft should do to catch up with Google? Be serious or be lame, whichever you prefer. Comments are open for your suggestions.

Q&A: Microsoft CEO Steve Ballmer Visits Central and Eastern Europe

2008-05-24T11:07:00.000+05:30

All next week, Microsoft CEO Steve Ballmer will be in Central and Eastern Europe to meet with government leaders, partners and customers, as well as Microsoft staff, to discuss how technology can continue to make a positive impact on people's lives. The EMEA Press Centre caught up with him as he prepares for his visit to find out more about the trip.

BUDAPEST, Hungary — 16 May 2008 — All next week, Microsoft CEO Steve Ballmer will be in Central and Eastern Europe to meet with government leaders, partners and customers, as well as Microsoft staff, to discuss how technology can continue to make a positive impact on people's lives. Click here for an interactive map of his activities throughout the week.

The EMEA Press Centre caught up with Ballmer as he prepares for his visit to find out more about the trip.

EMEA Press Centre: Can you tell us more about your trip to Eastern Europe?
Steve Ballmer: One of the great perks of my job as CEO of Microsoft is the opportunity to travel extensively and see firsthand how quickly the world is changing. Next week I am travelling to five countries in Eastern Europe — Hungary, the Czech Republic, Slovakia, Ukraine and Russia. While I'm there, I'm looking forward to meeting with government leaders, customers and partners, and leaders of some of the organizations we work with to promote access to digital technology and relevant IT skills and training. My goal is to discuss ways that Microsoft can support efforts to help people use technology to improve their lives and create sustainable growth and new economic opportunities. The trip is also a chance to catch up on the recent changes in the area and to experience the enormous progress the entire region has enjoyed in recent years.

EPC: How important is the CEE region for Microsoft?
Ballmer: While countries like China and India tend to get most of the press coverage as examples of rapid growth, the fact is that Central and Eastern Europe is the world's fastest-growing region and most economists anticipate that this will be the case for the next few years, at least. Right now, it is Microsoft's fastest-growing market, as well. Today, we have 23 subsidiary offices across the region, and we employ around 2,000 people. We operate significant development, technical support and innovation centres in cities such as Bucharest, Belgrade and Prague, and we continue to invest in the region because we are seeing a lot of growth and opportunity.

EPC: And finally, what is driving that opportunity?
Ballmer: A number of things — talent is first and foremost. Literacy rates are nearly 100 per cent across the region and the area's technical schools and universities are world-class. Increasingly, governments are also encouraging investment from overseas by creating attractive business environments. This concentration of talent combined with the growing recognition of the value of innovation and the opportunity to tap into the region's promising markets has made Central and Eastern Europe one of the world's most exciting areas for investment.

Microsoft Expands List of Formats Supported in Microsoft Office

2008-05-23T10:57:00.000+05:30

Microsoft Corp. is offering customers greater choice and more flexibility among document formats, as well as creating additional opportunities for developer and competitors, by expanding the range of document formats supported in its flagship Office productivity suite.

The 2007 Microsoft Office system already provides support for 20 different document formats within Microsoft Office Word, Office Excel and Office PowerPoint. With the release of Microsoft Office 2007 Service Pack 2 (SP2) scheduled for the first half of 2009, the list will grow to include support for XML Paper Specification (XPS), Portable Document Format (PDF) 1.5, PDF/A and Open Document Format (ODF) v1.1.

When using SP2, customers will be able to open, edit and save documents using ODF and save documents into the XPS and PDF fixed formats from directly within the application without having to install any other code. It will also allow customers to set ODF as the default file format for Office 2007. To also provide ODF support for users of earlier versions of Microsoft Office (Office XP and Office 2003), Microsoft will continue to collaborate with the open source community in the ongoing development of the Open XML-ODF translator project on SourceForge.net.

In addition, Microsoft has defined a road map for its implementation of the newly ratified International Standard ISO/IEC 29500 (Office Open XML). IS29500, which was approved by the International Organization for Standardization (ISO) and International Electrotechnical Commission (IEC) in March, is already substantially supported in Office 2007, and the company plans to update that support in the next major version release of the Microsoft Office system, code-named “Office 14.”

Consistent with its interoperability principles, in which the company committed to work with others toward robust, consistent and interoperable implementations across a broad range of widely deployed products, the company has also announced it will be an active participant in the future evolution of ODF, Open XML, XPS and PDF standards.

Microsoft will join the Organization for the Advancement of Structured Information Standards (OASIS) technical committee working on the next version of ODF and will take part in the ISO/IEC working group being formed to work on ODF maintenance. Microsoft employees will also take part in the ISO/IEC working group that is being formed to maintain Open XML and the ISO/IEC working group that is being formed to improve interoperability between these and other ISO/IEC-recognized document formats. The company will also be an active participant in the ongoing standardization and maintenance activities for XPS and PDF. It will also continue to work with the IT community to promote interoperability between document file formats, including Open XML and ODF, as well as Digital Accessible Information System (DAISY XML), the foundation of the globally accepted DAISY standard for reading and publishing navigable multimedia content.

Microsoft is also committed to providing Office customers with the ability to open, edit and save documents in the Chinese national document file format standard, Uniform Office Format (UOF). The company does so today by supporting the continued development of the UOF-Open XML translator project on SourceForge.net, and will take additional steps to promote the distribution and ease of use of the translator. As UOF develops and achieves market adoption in China, Microsoft will distribute support for this format with Office to its customers in China.

“We are committed to providing Office users with greater choice among document formats and enhanced interoperability between those formats and the applications that implement them,” said Chris Capossela, senior vice president for the Microsoft Business Division. “By increasing the openness of our products and participating actively in the development and maintenance of document format standards, we believe we can help create opportunities for developers and competitors, including members of the open source communities, to innovate and deliver new value for customers.”

Microsoft recognizes that customers care most about real-world interoperability in the marketplace, so the company is committed to continuing to engage the IT community to achieve that goal when it comes to document format standards. It will work with the Interoperability Executive Customer Council and other customers to identify the areas where document format interoperability matters most, and then collaborate with other vendors to achieve interoperability between their implementations of the formats that customers are using today. This work will continue to be carried out in the Interop Vendor Alliance (http://www.interopvendoralliance.org), the Document Interoperability Initiative (http://www.microsoft.com/interop), and a range of other interoperability labs and collaborative venues.

“Microsoft’s support for ODF in Office is a great step that enables customers to work with the document format that best meets their needs, and it enables interoperability in the marketplace,” said Roger Levy, senior vice president and general manager of Open Platform Solutions for Novell Inc. “Novell is proud to be an industry leader in cross-platform document interoperability through our work in the Document Interoperability Initiative, the Interop Vendor Alliance and with our direct collaboration with Microsoft in our Interoperability Lab. We look forward to continuing this work for the benefit of customers across the IT spectrum.”

“The demand for a document format that everyone can use is something I hear from our customers on a regular basis,” said John D. Head, framework manager at PSC Group LLC, a Chicago headquartered information-technology and professional services consulting firm. “I am very pleased that Microsoft is enabling Microsoft Office to support ODF directly from the software. This will allow us to develop solutions that create documents that can be edited by any user, regardless of what software or operating system they use. In a world where software companies want people to select one software package for their entire user base, the reality is that different user groups and types need options. Microsoft is now enabling users to make that choice. This is a very smart move by Microsoft, and one that lets the most important person — the customer — be the winner.”

This work on document formats is only one aspect of how Microsoft is delivering choice, interoperability and innovative solutions to the marketplace. Microsoft will continue to work with its customers and partners and the rest of the industry to continue advancing in the area. More information can be found at http://www.microsoft.com/interop.

Founded in 1975, Microsoft (Nasdaq “MSFT”) is the worldwide leader in software, services and solutions that help people and businesses realize their full potential.

Windows 7 and Windows 8 Bring New Performance Analysis and Diagnostics Tools

2008-05-22T06:53:00.001+05:30

Microsoft insisted to put Windows Vista at least on par, if not on a superior level compared to Windows XP in terms of performance throughout 2007, in a strategy that proved little efficient even though it also spanned to Vista SP1 and XP SP3. For Windows 7 and Windows 8, the Redmond company has changed tactics somewhat, and is determined not to permit feedback from the general public to dictate next Windows winner in the performance arena. As a matter of fact, the Windows Client Performance Team is hard at work in an effort to build the infrastructure and the tools to take Windows 7's performance to the next level.

At the same time, even with Windows 7 having reached Milestone 1 stage, and with M2 up next, Microsoft is also planning ahead all the way to Windows 8. For the next iterations of the Windows operating system, Microsoft plans to focus on enhancing performance for key components and applications of the platform. Starting with Windows 7, the Redmond company will work even intimately with original equipment manufacturers and system builders to provide them with the necessary resources to boost the quality of Windows PCs.

At the same time, Microsoft plans to build and reveal to the world what it referred to as extensible platform for Windows performance analysis. Such a platform already exists and is in use, but available only internally, at Microsoft. In addition, machines running Windows 7 and Windows 8 will benefit from unique industry standard definitions Microsoft is cooking up that will enable benchmarking and evaluating PC System performance.

With Windows 7, Microsoft will take the work done with Windows Vista in regards to enabling end users to perform basic troubleshooting tasks one step further through the introduction of a new breed of in-box diagnostics tools set up to detect the cause of performance issues. But the Redmond company's work will not be done with Windows 7. In fact, plans are already in place for even more complex in-box diagnostics resources for Windows 8. And, in Windows 7, the company will simply lay the foundation of what will come in the future.

Windows 7 on Steroids – Next-Generation Performance Boosters

2008-05-21T08:03:00.002+05:30

Yes, the silence around Windows 7 is certainly deafening, disconcerting and certainly a source of frustration for end users, but Microsoft is building the next iteration of Windows. Dubbed Windows 7 after Steven Sinofsky, Senior Vice President, Windows and Windows Live Engineering Group, dropped codenames for product numbers, as a part of his translucency strategy over the development of Windows, the successor of Vista is very much in the works. Furthermore, Microsoft managed to let a small piece of information slip through its tight grip about the performance boosting features that will be integrated into Windows 7.

In this context, the next version of the Windows client is not diverging that much from Windows Vista. In fact, the "same old" Super Fetch, ReadyBoost and ReadyDrive Vista native features will survive into Windows 7. Since the beginning of the year, the Redmond company has been looking to fill several job positions, all of them designed to enhance the performance of Windows 7.

"Do you want to solve hard problems and develop a new generation of cutting edge performance analysis tools used to make Windows faster and more efficient? Do you want to work on a long term project that ships externally and regularly?" Microsoft asks in a job posting. "The Windows Client Performance Team in the Core Operating System Division is searching for a top notch developer to help Microsoft design and build the next generation of performance tools necessary to take the performance of Windows and applications to the next level."

Microsoft's focus on the performance of Windows 7 is intense, and right it should be, after what Windows Vista went through, taking into consideration the inherent comparisons with Windows XP. It is no wonder that the Redmond company is looking to "develop the next generation of tools and features necessary to drive performance improvements directly into key Microsoft OS components and applications."

Another job is addressed at people who "want to improve the quality of the Windows experience for customers by working closely with OEM, IHV and ISV partners, and developing performance diagnostic tools to improve the performance and battery life of Windows as it exists in the real world". This job is focused on tailoring Windows 7 to mobile computers, and striking a balance between performance and battery life.

And just in case there is any doubt about what performance boosting technologies will be implemented in Windows 7, Microsoft reveals in yet another job listing: "The Windows Client Performance Team is looking for a highly technical PM to own the next generation of PCAccelerator technologies including SuperFetch, ReadyBoost and other features to make Windows more responsive."

Essentially, the Windows Client Performance Team will focus on the development of the next generation of the current performance enhancement features that ship as components of Windows Vista. In this regard, Windows 7 will also feature Super Fetch, ReadyBoost, ReadyDrive run-time performance diagnostics and even the Windows Experience Index, according to Microsoft. One thing is clear, Windows 7 will feature evolved versions of what the Redmond company refers to as PC Accelerator technologies.

Adapted from material provided by www.news.softpedia.com

EntreCard

2008-05-20T21:19:00.001+05:30

Microsoft's Yahoo Plans advance>>08

2008-05-20T07:21:00.000+05:30

News Analysis. Microsoft's advance>>08 conference is another context for interpreting yesterday's company statement on Yahoo.

I looked at the statement in context of Carl Icahn's Yahoo proxy fight. But as I briefly mentioned yesterday, there is another context—Microsoft's advertising event—and I'd like to expand on it today.

The advertising expo, which starts tonight, is Microsoft's coming-out party for Brian McAndrews, former aQuantive CEO and current Microsoft Advertiser & Publisher Solutions Group senior veep. McAndrews' team and technology have invigorated Microsoft's advertising sales efforts. For example, in Microsoft's fiscal 2008 third quarter, advertising grew a respectable 29 percent, but 40 percent when factoring in aQuantive, which Microsoft bought in May 2007 for $6 billion. It's no coincidence, methinks, that Microsoft bought aQuantive on May 18 and a leap year later advance>>08 commences on May 19. McAndrews will give a full-year report (caveat: the deal didn't immediately close).

So, what does any of this have to do with Yahoo? The news media likes to present simple cause-and-effect scenarios—they make for better stories and easier reading—but human decision-making is rarely so simple, particularly with regards to business. In past posts, I put forth some reasons, all valid, for Microsoft's Yahoo bid withdrawal. But advance>>08 is another one, and it almost certainly factors into yesterday's Microsoft statement on proposing a new transaction with Yahoo.

When Microsoft made its unsolicited Yahoo bid more than three months ago, surely CEO Steve Ballmer and his top executives expected to have some deal in progress by advance>>08. The Microsoft advertising event would be an obvious place to talk about new ad platforms, of wooing existing and potential ad customers to Microhoo's future and providing sound alternatives to Google. I don't doubt that Microsoft would have announced lower pricing than Google. Low pricing is a longstanding Microsoft tactic for breaking into new markets. How could Microsoft be so bold without scale, which is something big to have gotten from Yahoo.

I've repeatedly said that in business, perception is everything, particularly in any situation where existing or potential customers are involved. A bloody proxy fight would have been a terrible distraction during advance>>08. How could Microsoft credibly offer a clear advertising future vision when storm clouds loomed over the present—and its impact on the go-forward ad strategy? After pulling out of the deal, Microsoft took charge of the messaging about its advertising and search future, making the best of a disappointing situation.

In context of advance>>08, yesterday's Yahoo statement and internal company e-mail from Kevin Johnson make sense. Johnson, president of Microsoft's Platform & Services division, is one of the architects of the proposed Yahoo acquisition. It's no coincidence that Microsoft dispatched these internal and external communications around the same time—and both have to be coordinated for this week's advance>>08. The company needs to show that it still has vision and that there might even be a Yahoo deal that could boost the ad-serving capacity. Positive perception is crucial as the event commences.

Yahoo issued its own statement sometime after I posted on Microsoft's statement yesterday:

"Yahoo has confirmed with Microsoft that it is not interested in pursuing an acquisition of all of Yahoo at this time. Yahoo and its Board of Directors continue to consider a number of value maximizing strategic alternatives for Yahoo, and we remain open to pursuing any transaction which is in the best interest of our stockholders. Yahoo's Board of Directors will evaluate each of our alternatives, including any Microsoft proposal, consistent with its fiduciary duties, with a focus on maximizing stockholder value."

I wouldn't exactly call that an open-arms response, but Microsoft can still hold out the promise of something, which should reduce some of the pressure from existing or potential customers. Surely they were going to ask what about Yahoo and what if no Yahoo?

Kevin's Memo in Context
Johnson's memo is interesting reading. Interesting aside: In the last 24 hours, lots of news sites or blogs published the internal e-mail in its entirety, including All Things Digital, CNET News.com and Giga OM. But I don't see that anybody cited a source, not even as leak or official distribution. What? Did a genie just pop out of thin air and type the text on blogger and journalist computers?

I fuss for a reason. In my many years as a working journalist, I've seen too many feeding frenzies, where one story leads to many "follows" by other news organizations. Sometimes, the original reporting wasn't accurate. The risk increases with the high volume of blogs and their hearsay style of citing other blogs. Original reporting is crucial to getting out accurate information. At the least, sources should be cited in the case of a major memo outlining Microsoft's advertising strategy. In this case, it's reasonable to assume that Microsoft leaked the memo, but nobody is saying. Microsoft's Yahoo statement and Kevin e-mail dispatched around the same time yesterday. That's no coincidence.

Early this morning, I confirmed the e-mail's veracity, but hadn't obtained a copy before posting (I actually delayed posting for some time waiting on the memo). I referred to full text from All Things Digital.

Kevin concedes early on: "We are not where we want to be in this business yet and we've been in this position longer than we'd all like." Then he begins to lay out the go-forward strategy:

"On Wednesday, we will be announcing a major new initiative that our search teams have been driving. We are getting better and better with our core algorithmic search, and at the same time, we are investing to differentiate in vertical experiences and to disrupt the current model. You'll hear more about our plans Wednesday."

Live Search group's spring update is progressional, and Microsoft has been rolling it out piecemeal over the last couple weeks. Kevin then launches into an eight-point plan:

Be innovative and disruptive in search.
Advance targeted search distribution.
"Reinvent portal and deliver new experiences across PC, phone and Web. We are building our new releases of Windows 7, Windows Live wave 3, Windows Mobile 7, Internet Explorer 8, Search and MSN with an eye towards optimizing and unifying experiences and scenarios."
Fix brand fragmentation.
"Win in display advertising. We have an advantage in tools, agency assets/relationships and a team laser-focused on capturing the display ad platform opportunity. As we build from a position of strength, we will increase engineering resources to drive even more innovation."
Expand European search and ad business.
Expand strategic partnerships (which I assume is where the Yahoo statement makes some sense).
"Pursue small, targeted acquisitions. Looking forward, we will focus on small, targeted acquisitions that support our work in search, complement our value in the ad platform and help us grow scale in key geographies."

To be honest, Kevin doesn't say much concrete about what Microsoft is going to do for customers now and perhaps he shouldn't. The thunder is best saved for advance>>08.

I will call out the third and fourth points. The third is affirmation of what I've been saying to expect: Tighter integration among Live services and Microsoft operating systems. The fourth is badly needed. Microsoft has too many major Live brands and associated sub brands—and too many logos. The common toolbar, presenting major brands Hotmail, MSN, OneCare and Spaces is a good starting place. But where's Messenger?

Microsoft has a busy advertising agenda ahead this week. I'll blog important topics as they come up.

Steve Ballmer and the Microsoftdom of Yahoo

2008-05-19T09:01:00.000+05:30

News Analysis. Grab the popcorn. Like the fourth Indiana Jones movie, the Microhoo drama has another sequel.

This afternoon, Microsoft issued a statement indicating that a new—and perhaps even different—Yahoo deal is in the works. The statement comes three days after billionaire business buster Carl Icahn launched a proxy fight to oust Yahoo's board of directors.

As I said on Friday, Carl's coup could cripple Yahoo, creating market share and customer grabbing opportunities for Google. Microsoft can't let the proxy fight destroy Yahoo to the benefit of Google.

I'm not surprised that Microsoft is once again talking some kind of deal. A hostile Yahoo takeover would cause Microsoft loads of self-harm, perhaps more than any good. Even a friendly takeover would have questionable benefits because of the enormous product and service overlap between the companies. But if the choice is some Yahoo deal—even a new acquisition—or strangulation at the hands of Carl Icahn, I say make the deal. Any deal.

Microsoft stands to lose more to Google, in a protracted proxy fight that also damages investor and, more importantly, customer confidence in Yahoo. Google is much more likely to pilfer fleeing customers than is Microsoft. Again, as I said on Thursday, Microsoft might be the white knight that can save Yahoo from Carl Icahn.

Even before Carl's proxy fight, I expected that Microsoft would come back if invited by Yahoo. It was clear to me that Microsoft CEO Steve Ballmer's letter withdrawing the bid was aimed at shareholders and even stirring up some revolt among them. But the revolt didn't come from within, but outside in the form of a billionaire investor who has a history of waging proxy battles against seemingly beleaguered companies.

On May 5, eWEEK.com ran a Reuters story quoting Craig Mundie, Microsoft chief strategy and research officer: "The market may wish that the Yahoo deal may come back together, but Microsoft at least at this point assumes it's over." We had some internal debate about what the statement meant. Earlier, an editor had interpreted the statement in a headline to mean Microsoft had closed the door on any deal. I read the statement quite differently.

In an IM conversation with another editor, I asserted: "That's an editorial interpretation. He's not quoted as saying that. He says that Microsoft assumes it's over, which is hugely different. Yahoo could easily come back and accept a lower bid—and there's a deal. These Microsoft people are always deliberate in their wording."

Craig's "at this point assumes" was a huge open door to a future deal. Now, a new deal is in play. Today's Microsoft statement:

"In light of developments since the withdrawal of the Microsoft proposal to acquire Yahoo! Inc., Microsoft announced that it is continuing to explore and pursue its alternatives to improve and expand its online services and advertising business. Microsoft is considering and has raised with Yahoo! an alternative that would involve a transaction with Yahoo! but not an acquisition of all of Yahoo!"

Is what's good for Yahoo good for Microsoft? Companies don't usually disclose transactions while they are being negotiated. The public statement applies pressure on Yahoo's board, which already has got more than it can handle in Carl's proxy fight.

Remainder of the Microsoft statement:

"Microsoft is not proposing to make a new bid to acquire all of Yahoo! at this time, but reserves the right to reconsider that alternative depending on future developments and discussions that may take place with Yahoo! or discussions with shareholders of Yahoo! or Microsoft or with other third parties. There of course can be no assurance that any transaction will result from these discussions."

Yahoo responded to Carl Icahn on Thursday, but, as of this posting, not yet to Microsoft's statement. By itself, the statement is hugely beneficial to Yahoo's board and could instill confidence even as Carl seeks to undermine it (there is the aforementioned benefit of applying "pressure," too). Perception is everything in business. Carl's proxy fight can only succeed by creating negative perceptions about Yahoo's board. Microsoft's four-sentence statement should boost Yahoo perception and likely the share price come the stock market's opening on Monday.

The statement also creates uncertainty because Microsoft might not buy Yahoo after all. No new bid is yet on the table, just discussions that could lead to business transactions or even acquisition of some Yahoo assets. That said, the statement is clear that Microsoft could "reconsider" an acquisition.

If not for Carl Icahn, I would still advocate that Microsoft walk away. Now Microsoft must rally to Yahoo for its own benefit, lest Google gobbles a bunch of Yahoo customers and market share in a short time. Microsoft's motivations may have absolutely nothing to do with the billionaire business buster. But they should.

Regardless, his attack has put Yahoo's board in a weakened position and one where board members should want some kind of deal with Microsoft. If the choice is between the devil Yahoo knows (Steve Ballmer) and the one it doesn't (Carl Icahn), take Microsoft. At least Microsoft wants to make something better out of Yahoo.

Icahn Yahoo Better than You?

2008-05-18T11:00:00.000+05:30

News Commentary. Maybe Yahoo should have taken Microsoft's money. Suddenly, there are worse assaults.

Carl Icahn's proxy fight is sure to put an end to Yahoo as we know it—unless a majority of investors rally for the company's cause. But proxy fights favor large investors like Carl is trying to be, even though they are the minority holders in Yahoo.

The proxy battle also illustrates one of the many things wrong with the rules, whether enforced culturally or with regulations, that govern public companies. Yahoo CEO Jerry Yang clearly is in process of turning around the company he co-founded. His predecessor spread Yahoo too far and too thin in an effort to make it into a global media conglomerate. Jerry is aligning Yahoo's priorities with the competitive Web 2.0 marketplace.

Jerry needs more time to right the listing, but by no means sinking, ship. Yahoo may be between a Google rock and a Microsoft hard place, but there is hope in good leadership. (Apologies for the mixed metaphors.) Jerry's team is making Yahoo more pliable, and maybe just pliable enough to squeeze between the rock and hard place.

Shareholder Moral Dilemma
Microsoft's unsolicited bid and now the proxy fight distract from the task at hand. We may never know if Jerry's team could fix Yahoo, because of Carl's self-centered action. I say that not as a value judgment but as a pragmatic observation. He's a ruthless investor and well-known shareholder activist. But is Carl a longstanding investor in Yahoo? He bought 59 million shares or share equivalents following Microsoft's bid withdrawal and seeks to acquire as much as $2.5 billion in Yahoo stock. Carl is suddenly a major Yahoo investor, but is the objective his benefit or Yahoo's? Need I answer?

There is no moral high ground in business. The high ground is quagmire, because all public companies share one, and only one, moral objective: Make profits for stockholders. It's the great contradiction about public companies and the people who own them. U.S. law treats businesses like people, but the organizations don't share the same moral objectives as human beings. The "good of all" isn't about humankind but shareholders. This moral difference is one of the major reasons some businesses egregiously act against the common good of all people. But that's a moral topic for another venue.

The moral issue here is a simply stated question: Who is acting in the best interest of all Yahoo shareholders, Carl Icahn or the company's CEO and board of directors? The answer is the measure by which Carl and Yahoo's board should be judged. My secondary question: What makes newcomer Carl a better judge of what Yahoo should do than people who have been committed to and invested in the company for a long time? (For the record, I am not a Yahoo investor or an investor in any other company.)

In his letter to Yahoo Chairman Roy Bostock, Carl asserted:

"The board of directors of Yahoo has acted irrationally and lost the faith of shareholders and Microsoft. It is quite obvious that Microsoft's bid of $33 per share is a superior alternative to Yahoo's prospects on a standalone basis. I am perplexed by the board's actions. It is irresponsible to hide behind management's more than overly optimistic financial forecasts. It is unconscionable that you have not allowed your shareholders to choose to accept an offer that represented a 72 percent premium over Yahoo's closing price of $19.18 on the day before the initial Microsoft offer. I and many of your shareholders strongly believe that a combination between Yahoo and Microsoft would form a dynamic company and more importantly would be a force strong enough to compete with Google on the Internet."

What Happened Before?
Perhaps the measure of Carl's competence to judge Yahoo's board is the past—what happened to other companies besieged by his attacks? Carl's proxy battle to get on Motorola's board failed, but his vicious public criticisms helped undermine confidence in the company. In business, perception is everything. His unsuccessful proxy fight fostered the perception of a weak Motorola—I'd say weaker than it really was—and led to the eventual departure of CEO Ed Zander. How exactly did a perceptually weakened Motorola benefit investors?

Carl's investment in and battle with BEA Systems also undermined confidence in the company and led to its acquisition by Oracle. Are BEA shareholders better off because of Carl's actions? Rather than do the math, I'll ask: If you were a BEA investor, tell me and Microsoft Watch readers in the comments what you think. Did you benefit or lose out?

If you take a hard look at Carl's attack strategy, he invests in companies that appear to be weak and through investment and proxy fights increases the perceived weakness. BEA, Blockbuster, Motorola and Yahoo were all struggling companies with solid foundations when Carl moved in on them. Did all shareholders benefit?

I'll take a single example as answer: Blockbuster stock traded for around $10 a share in May 2005, when Carl's proxy fight won him and two associates seats on the board of directors. In a CNBC interview, Carl described the proxy fight as "a very strong victory. Most importantly, we want accountability." But who's accountable to other shareholders? When I wrote this paragraph, Blockbuster shares were $3.18.

Winner Lose All?
Carl stands to profit from a proxy fight, but he also risks losing hundreds of millions—maybe billions—along the way. His proxy fight is based on the assumption that Microsoft would still acquire Yahoo. That's a rather bold assumption, frankly. Microsoft might come back with an offer, but likely much less than $33 a share—and the premium wouldn't be as great. Carl could still profit nicely from buying shares cheap and cashing in at higher value. But how is that in the best interests of all, or even most, Yahoo shareholders?

Carl's proxy battle can only hurt Yahoo—and Microsoft should weigh the competitive impact of any damage. The proxy battle and, if successful, new board of directors would create grave uncertainties about Yahoo's future. Customers don't like uncertainties, particularly with the economy rocking unsteadily. They need their ads served up by a company they can trust. Google would likely be the greatest beneficiary, picking up advertising and search customers from Yahoo. That's an outcome Microsoft doesn't want.

Microsoft CEO Steve Ballmer knows this. Why do you think he walked away? A proxy fight would diminish Yahoo's value and undermine confidence in day-to-day business operations. Negative perceptions about Yahoo would drive customers away and into the open embrace of Google. I expect that Microsoft would pick up some customers, but Google would take many, many more. A weakened Yahoo could help Microsoft later on, but not yet and certainly not from the kind of perceptions a proxy fight would create.

Strangely, Microsoft might be the white knight that can save Yahoo from Carl Icahn. If Steve and Jerry aren't already talking about a new deal, they should be. Carl just set off the timer on a very dangerous proxy bomb.

Whether or not Yahoo's board wins the proxy fight is immaterial. If Carl uses his past playbook—and his letter indicates that he will—the proxy fight will undermine confidence in Jerry, the board of directors and Yahoo management. It's a lose-lose situation for them and Yahoo. If Carl successfully ousts the board, he may win the battle but lose the war for all Yahoo shareholders, particularly if Microsoft doesn't deal. Then the weakened Yahoo would be crushed between the Google rock and Microsoft hard place.

What do you think?

One Windows Per Child

2008-05-17T11:16:00.001+05:30

News Analysis. Microsoft's OWPC initiative has succeeded, nicely. Apparently, Sugar isn't so sweet.

But will the alternative be any tastier? That's the question to ask as the drama around OLPC (One Laptop Per Child) becomes the ever-growing soap opera. High-level executive departures, a near-$200 laptop price instead of the planned 100 bucks and now Windows XP pushing out Sugar OS. Somebody wants to influence the world's youth.

Microsoft made its announcement late yesterday, and I almost blogged it before going to bed. But this one needed a fresh mind to grapple with all the nuances behind the drama.

Microsoft's announcement is simple: OLPC will license Windows XP for its XO laptop. Trials will start in June in some emerging markets, which Microsoft's press release doesn't identify. Fortunately, Microsoft's Unlimited Potential blog is more forthcoming. James Utzschneider, marketing and communications general manager for Microsoft's Unlimited Potential group, blogged:

"The offering will RTM [release to manufacturing] in August or September. Initially it will only be available in emerging market countries where governments or NGOs [non-government organizations] are subsidizing the purchase of a large number of PCs for students, but there is the possibility of making this available for other customers through a broader set of channels at a later point in time."

James is refreshingly frank about Microsoft's objectives:

"From our perspective, Windows on the XO is a nice addition to the portfolio of products and services Microsoft has created to help transform education, one of the key themes of Unlimited Potential...The Windows port to the XO is a snappy release that doesn't cut features or functionality in order to work in the constrained memory and storage environment of the XO...Why is Microsoft doing this? The answer is simple: people are asking for it—it transforms education and it leads to the creation of jobs and opportunity."

Follow the Spiritual Leader
Maybe Microsoft Chairman Bill Gates always will be the company's spiritual leader. I find interesting that Microsoft is putting so much emphasis on emerging markets at the same time Bill is transitioning from full-time monopolist to philanthropist. Microsoft puts a real charitable PR spin to its Unlimited Potential program, which isn't philanthropy. It's business. Microsoft wants to sell more products in more markets. The charitable facade is part of the sales effort.

Yes, Microsoft is helping people. But it's not like Mother Theresa work, where the personal benefit is satisfaction of giving. Microsoft profits from its Unlimited Potential work. Cheap XO PCs running Linux interferes with future Microsoft profits, since the company's software and the majority of its services require Windows.

Sorry, but I would be embarrassed to work on what I call the One Windows Per Child program. For too long emerging markets have received cast-off goods, clothes and even pharmaceuticals from so-called mature markets. Microsoft's modern operating system is Windows Vista, but XO laptops will instead get 8-year-old Windows XP. I concede there are limitations. Vista demands too much hardware resources to run on low-powered, flash-based devices such as XO. But that's a problem of Microsoft's making.

Worth noting: Bill may be pushing along the charitable path, but Microsoft isn't wholly following. I don't see Bill advocating second-best anything for emerging markets. In that respect, he's more unlimited potential-minded than his company.

Conflicting Interests
OLPC's approach certainly is imperfect. There is plenty of justified criticism. But at least founder Nicholas Negroponte initially tried to find compromise by creating something new, yet affordable, for emerging markets. That goes for the hardware design and Linux-based Sugar OS. But charitable work often encounters opposition from businesses with conflicting interests.

For example, Intel has been a vocal critic of the OLPC program. Early on, Microsoft executives criticized the XO—Bill on several occasions, including a January 2006 speech before the World Economic Forum. A cheap, Linux laptop for students could disrupt Microsoft's emerging market business objectives.

The decision to adopt Windows XP appears to have caused conflict and division within OLPC. Many charitable organizations produce even bigger egos than do businesses and with surprisingly less willingness to adapt. In March, Ivan Krstic left OLPC because of changing goals, which some people assumed had to do with Windows XP. He blogged:

"Not long ago, OLPC undertook a drastic internal restructuring coupled with what, despite official claims to the contrary, is a radical change in its goals and vision from those that were shared with me when I was invited to join the project."

About a month later, Walter Bender also left OLPC. Walter and Ivan were two of the principal developers working on Sugar OS. Walter's exit statement says nothing specifically about Windows XP on XO. However, he was reportedly demoted as head of Software and Content before the departure.

Do You Want Sugar or Spice?
The decision to adopt Windows XP, and quite possibly to abandon Sugar, surely has no one cause. The aforementioned business and internal OLPC conflicts must be some reason. Windows familiarity may be another reason. As Microsoft has learned with Windows Vista, something new is harder sell when businesses or consumers are satisfied with something familiar (Windows XP).

I don't doubt James when he writes that some "people are asking" for Windows. But who are these people? Governments and NGOs want what for their students? The more pressing concern is what they want for their local economies today. Microsoft has partners pretty much everywhere. It's in better position to attach additional products and services to Windows than Sugar OS. I highly doubt that students are rising up demanding XP over Sugar. In many geographies, the kids would be happy just to get the laptop, regardless of operating system. For Microsoft, One Windows Per Child is the only program, if anybody asks.

For now, OLPC recipients will choose from either a Sugar or Windows XO laptop. But James blogged:

"OLPC plans to write a new BIOS and increase the amount of flash storage on the XO to support a 'dual-boot' option that would enable children to use either Linux or Windows on the same machine. This is fine with us as long there continues to be an excellent Windows experience on the XO."

The last sentence asserts Microsoft's business priority as superseding OLPC's objectives. Read the sentence again. Read it in context of James' entire blog post.

Microsoft is licensing Windows XP Home, not Professional, for devices such as XO. So how will schools network the computers? Peer to peer? Unmodified XP Home doesn't connect to a network domain. It's one of the many problems associated with offering something old, or, in the case of Windows Starter Edition, something less.

I can't say that Sugar is the best real-world, practical operating system choice for XO. But its development is a commendable effort, and the OLPC Wiki chronicles lots of Sugar and XO success, without ever offering Windows XP.

One Laptop Too Many?
In the end, OLPC's biggest problem may be the fundamental concept: one laptop per child. On several occasions when criticizing XO, Bill said the cell phone would be a better choice. He is absolutely right. In most emerging markets, the cell phone is the first Internet-capable computing device, not the PC.

Some people call the phenomenon "technology skip," where a market jumps over one class of product for something newer. As cell phones get smarter, wireless data bandwidth increases and smart phone costs decline, the mobile device makes more sense as alternative to the PC.

Technology skip would bring bleeding-edge, or at least current, products to emerging markets. It's where these markets can leap ahead of mature ones built up around older technologies. It's also an area where Microsoft does offer current, rather than old, software or services.

For some people, the future of computing will be a smart phone running Windows Mobile 7 connected to Live Mesh. Will the combination release their, uh, unlimited potential?